Opinion

Long-Term

Long-Term There’s an old joke on Wall Street that investors like to say that they invest with a long-term mindset.  It’s just that long-term means only until the next bear market. Stock is a claim on a company’s assets and future earnings.  There are a bunch of different ways to estimate what a stock is worth, but part of the input is going to be an estimate of future earnings.  This sort of thing is fascinating because obviously we don’t know what the company’s future earnings will be.  We can only guess.  Looking at a company like Tesla, it seems that the market has been pricing in strong growth for several years.  A company like Apple might have a less volatile stock price because the earnings are more consistent and easier to model.  If the cost of a component in an iPhone goes up, analysts can adjust their expectations relatively…

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When the Recovery Will End, Emotion, Controversy

When Will the Recovery End? (Spoiler Alert: It’s Already Over) After 10 years, surely the end of the recovery is near?  I still see investment products pitched with this kind of wording.  It turns out that the recovery ended 84 freaking months ago.  Since then, we’ve been in expansion.  84 months sounds like a long time (7 years!), but in the context of previous expansions, it’s not remarkable in either length nor size (there’s a joke here, somewhere).  The expansion following recovery from the tech crash was just 12 months, with a gain of 14.6% on the S&P 500.  However, the two prior expansions were 135 and 134 months long and gained over 400 and 500% (see graphic).  Should we be worried about the current expansion?  Let’s break 100 months first, then three years after that let’s start worrying.  In the meantime, stick to your financial plan. Taking the Emotion…