A Tad Of Perspective

It might be worthwhile to offer a little perspective to things given the varying degrees of concern and uncertainty people are feeling these days.

It is a good bet that there are plenty of people who have taken no defensive action. Either they are that passive or their advisor doesn't do that for some reason or perhaps something else. Will there be grave consequences five years from now if a diversified portfolio has not taken any defensive action today? Anything is possible but the I think the answer is probably not.

If you have high expectations for China in the coming years, have those expectations changed at all during this selloff? This has not changed my expectations for China. Most clients have exposure to an oil sands name. I have yet to find any analysis that says the entire increasing demand for oil theme is now over because stock prices are down. This correction/bear market/whatever has not impacted the electricity needs for customers of my favorite utility. I own a few foreign bank stocks for clients. Assuming no fraud, the big banks from insert your favorite foreign country are not going out of business. Perhaps we are all spending $8 less per week at Walmart (not a name I own) but we are still going. If you run out of toothpaste are you going to hold off buying more until Colgate (not a name I own) goes up a couple of points? What about the people waiting in line at Starbucks (a name I do own) for their half-caf no-foam skinny latte?

Let's be clear none of the above means much for determining stock prices for the rest of the summer. The moves I have made have been an effort to add value in case the market goes down a lot. If you do miss a big chunk of one down a lot period in your lifetime your average annual return numbers will likely go up a fair bit but if not you'll be pretty close to that average 10% in your lifetime. If you save enough money, market-equaling returns will do the job.

This is tough to grab onto but you don't really need to worry about being down today, you need to make sure you have enough when you need it in the future. Any value you an add beyond that is gravy but the key is saving properly.