August 2, 2012 | Back to: News

Market Pulse: It’s a good year for stocks – here’s why

INCLINE VILLAGE, Nev. — On CNBC.com, a well-known analyst explained why most investors have missed this year’s spectacular rally (the Sandamp;P 500 up 10 percent). By reading the other headlines, and listening to this analyst’s past comments, the answer is easy to identify — investors are overwhelmingly negative on stocks.Being negative is always easy. That’s because the news headlines always cover what is wrong. There is a lot to cover now — high unemployment, a slow-growth economy, Europe, LIBORrate-fixing, JPMorgan’s trading losses, etc.Here’s this week’s takeaway: The negatives are always about the here and now, obvious problems that are front-page/online news and the focus of the Sunday interview shows. Their iHmpact is visual (unemployment lines, vacant houses), sometimes heartbreaking and easily documented with numbers about jobs, housing prices, GDP, etc.But the stock market isn’t about what is happening today. It is forward-looking. Today’s numbers matter little and last year’s are irrelevant. Only future growth and future profits matter. Yes, the days of rapid GDP and earnings growth year after year are history and won’t return anytime soon, but that won’t be a disaster for Americans or for investors. As Blackstone’s market sage Byron Wien put it recently, “Disaster has a way of not happening.” Plus, with a price-to-earnings ratio of 13, stocks are cheap.The Sandamp;P 500 is ahead 10 percent this year despite the economic data, dire warnings and relentless selling by individuals. Larger investors with a longer time frame and an eye for value must be buying, as they did at the bottom of the recession in 1982, after the 1987 crash, and again in March of 2009 during the financial crisis. In each case the news was every bit as bad if not worse than today’s and the outlook equally dreary.The best course for investors was to focus on the long-term positives, however, not the compelling, even scary negatives. That course seems difficult now and some would say requires a leap of faith. I disagree, in part. Difficult, yes, as it always was in tough times, but it requires not a leap of faith, merely a sense of history.— David Vomund is an Incline Village-based fee-only money manager. Information is found at www.ETFportfolios.net or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.

David VomundSpecial to the Bonanza


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Tahoe Daily Tribune Updated Aug 2, 2012 01:52PM Published Aug 2, 2012 01:50PM Copyright 2012 Tahoe Daily Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.