Does the stock market's behavior make you nervous? Not able to muster a strong conviction one way or another about the economic outlook? Maybe you're worried about the same stuff that's on everyone else's mind. I'll explain.
There were any number of things I would have preferred to have spent the money on, but the problem had to be addressed. I bought the four tires for my car.
All the other parts of the car were working fine, but the wear on the tires told me that to be safe, they needed to be replaced.
The tires were just more than $1,000, but replacing the car would have been around $40,000. Cash for clunkers wouldn't have worked - the fuel efficiency wasn't bad enough, although it certainly seemed so every time I put gas in it.
That personal story contrasts what I did - what most of us would do - with how Washington, especially that side of the aisle (you know which one I mean), would have dealt with the situation.
"We need four new tires. Let's get rid of the old tires - oh, and the car. Scrap it, and by the way, let's get a bigger car with more bells and whistles on it this time. Matter of fact, let's just go ahead and buy a whole fleet of new cars in case someone who doesn't have one needs a ride. Don't forget to check the campaign donor's list so we know who gave the most before we decide where to buy them."
Hmm, we don't get straight-forward common sense solutions when retention in office is a motivating factor, do we? I know that it is casting stones at my home state of Illinois, but see what you get when you transfer Cook County politics to Washington, D.C.?
Can you run your business that way? If one computer monitor goes out, would you replace the entire network? Ah, what the heck, that was a rhetorical question, as no businessperson reading Springfield Business Journal would run a business that way.
But that's what we have with HR 3200, America's Affordable Health Choices Act of 2009. Health care problems exist (no system of any kind, whether in the private or public sector, is 100 percent perfect), but realists would keep what's working and fix what's broken. Others, for their own reasons, not the least of which could be largess for their constituencies, would scrap the whole thing.
The health care wrangling is hanging over the markets, clouding the outlook for many industries and adding to investor uncertainty. We should throw in cap-and-trade concerns; a mounting federal debt that doesn't include the off-balance sheet obligations of Medicare and Social Security; the expected end to the tax cuts enacted by the past administration; and a weakening dollar.
Whew! It's enough to make anyone think carefully about where and how to invest.
Markets hate uncertainty. Good news - love it. Bad news - it can be handled. But uncertainty leads to money moving nervously and frequently into one industry or country, which in turn can add unwanted volatility.
If you are a trader, have at it and good luck. If you are an investor, stay with the companies that have the financial strength to not just pay substantial dividends, but to increase them on a regular basis. Those companies also should have revenues that are, at a minimum steady, but ideally rising. Even these issues can be subjected to price swings, but they can reward investors' patience with attractive yields while awaiting a clearing of some of the economic uncertainty.
Oh, yes, and don't forget the investing cliché: "A bull market must climb a wall of worry."
Clark Davis is a 37-year investment veteran and CEO of St. Louis Investment Advisors, a specialized money-management company. He can be reached at cdavis@slia.com.
