Friday, July 29, 2011

Crisis Du’ Jour

There is much anxiety regarding the fight over the country’s debt ceiling. Both sides seem to be sticking to their guns, while encouraging the other side to compromise. Right now, it looks like a staring contest. The first to blink loses. The market feels the tension: rising despite negativity one day, and coming back down the next.

The biggest question on an investor’s mind might be, “What do we do now, if anything?”

Our answer might sound a little familiar…. Nothing.

No one knows where this crisis might lead. Perhaps no deal is reached, our country defaults and the market takes a dive. Perhaps compromise is made in the 11th hour, causing the market to react positively and soar. Perhaps something else occurs.

There is uncertainty, that’s for certain. But to make investment decisions based on uncertainty is to speculate, and speculating is dangerous. Luckily, we don’t have to. We can have long-term investment success by choosing an allocation that is in line with our risk tolerance and sticking with that allocation through the ups, downs and in-betweens.

There will always be a new crisis to worry about. Some will be quick and painless; others will hurt and require time to heal. Which direction this one goes remains to be seen. How wonderful it would be to predict and reliably time the market. Alas, Mr. Market does not permit this. So in the meantime, the mantra is to ‘stay in your seat’. It is the most prudent way to capture a positive long-term investment experience. Sometimes, a decade worth of gains occur in a short time period. Know that you own thousands and thousands of stocks in good companies. Each day, their values bounce around. But being in the market ensures that you take full advantage of their ultimate rise.

Having said all that, we understand the anxiety that is out there right now. Should you want to talk further in person about this issue, please call.

Friday, July 1, 2011

Independence Day

Pathways Advisory Group, Inc.
Dustin Smith, CFP®

What is our place in the changing world? We remain the largest economy in the world¹ but other economies are growing fast. We face challenges and uncertainty. We face tough decisions. The history of this nation suggests we are up for the challenge. If you haven’t already watched the History Channel series, America The Story of Us, please do. It’s quite a story…

What technology will influence the direction of the next twenty years? What role will this country play? Where will we make the greatest advances? Healthcare? Technology? Transportation? Energy? It will be interesting. Just consider how far we have come the past 150 years…

Barbed wire transformed prairies and the American dream. Mass production of steel led to vertical cities. The steamboat, railroad and telegraph allowed American commerce to spread. Thomas Edison’s work brought light and power to the masses. Advances in medicine improved life expectancies and quality of life. The cotton gin and automobile assembly lines changed the capacity of industry. Automobiles led to interstate highways and suburbs. Dams, canals and aqueducts provided for a housing boom and expansion of the west. Television, computers and cell phones changed our daily lives. Air travel shrunk the country. The internet shrunk the world. Every generation has brought new ideas. Every generation has improved upon the previous. In each case, an idea and the technology to make it happen have been the driving force.

Are we out of ideas? Have we tapped all resources? Is there no more room to improve? I suspect the next 20 years will be much like the last 150. I suspect this nation will play a role. I suspect Life, Liberty and the Pursuit of Happiness will have something to do with it...

Happy 4th of July.

¹ 2010 World Market Capitalization Chart (below) and GDP Top 15 Rankings.