Friday, August 8, 2014

Thoughts on Mr. Market

 Science and Dividend Gremlin here.  Today I would like to talk about the one thing that is always all over the place.  Like your favorite (or least favorite) Uncle on the 4th of July or your last girlfriend (or boyfriend).  That person is Mr. Market.

Right now the market has slowed its month long advance, and some analysts out there are calling  for doomsday or some other catastrophic event.  Sure enough we have several wars ongoing right now in the world.  None of that is any good, nor is the Ebola virus in Africa, nor the seemingly too frequent downed jet-liners.  Still that is our world, and something is always going on.  In fact you'd think that the market is going up.  Why?  Well historically wars, sadly, are profitable for someone.  Health care always seems to blossom whenever there is a new disease that needs to be cured or treated.  Think about AIDS/HIV - 20 years ago there was no treatment, today there is a market full of drugs worth billions or as the cool kids would say - racks on racks.

I digress though, Mr. Market has always been fickle.  Which is one reason why a lot of people my age avoid putting their money it.  They think they will loose it all or by some stroke of magic they will be rich quick.  It works that way for supercomputers, not for regular people.  Patience is what we all need, and a little bit of initiative. 

Still, in today's world, a lot of people operate under the pretense of "what can you do for me now" or "what have you done for me lately?"  There is no time to waste in terms of people's money, they want instantaneous gains, and to have the next Apple (AAPL) sitting in their portfolio.  That is the kind of attitude big investors love, because it means at whether Mr. Market climbs or falls people will be making trades and gambles - and paying them fees to do it.

Dividends are the true buffer.  Owning pieces of quality companies, that pay the owners.  After all why own a company you get nothing for in return?  Its like giving a friend money to start a business, getting none back until you tell him you want out (then still having to help him move into his mansion and only to get paid with pizza).

In addition, dividend stocks tend to overtime hold value better than non-dividend stocks.  They also tend to keep up with and or beat inflation.  Its the best guard against the loop-de-loops of the economy.

There is something to be said for making money, but only putting in the capital you have earned from your hard work.  That entire sentence is the essence of retirement, and it is usually what makes truly rich people stand out from the rest of us.  They put their money to work for them, instead of working all the time for their money.