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| Adrian Mastracci, president of KCM Wealth
Management, says "Investors continue to feel like those
purchasing managers who are having trouble figuring out the
near term business climate so that they may place the corresponding
orders." |
For Immediate Release
Vancouver, BC (September 3, 2002): Every time
investors hear or read anything about the US economy, it seems that
they want to run and hide. Preferably, in the fetal position. After
all, the US represents about half of the total global economy.
We’ve had no shortage of economic data to make them feel
vulnerable. Here is some of it:
- The New Orders Index released today came in at 49.7 versus
50.4 in the previous month.
- The Initial Claims for the week ending August 24 rose by 8,000
to 403,000 where the expectation was for 385,000.
- The GDP for the second quarter 2002 was up 1.1% versus 5% in
the first quarter.
- The Conference Board consumer sentiment for August 2002 dropped
to 93.5 from 97.4 in the previous month.
- Businesses have yet to see the plus side. Perhaps, a representation
is Hewlett-Packard’s July 31 quarter results. Sales dropped
to 16.5 billion from 18.6 billion a year ago.
- Intel and IBM have each announced additional job cuts of 4,000.
- Consolidated Freightways has just filed for bankruptcy. More
than 15,000 jobs are affected immediately.
- Some US corporations, such as Ford, are expected to report
underfunded pension plan results by the end of 2002. There will
be significant pressure to restore full funding.
- The earnings warning season is about to heat up again this
week. Companies, such as Intel and Citigroup, are anticipating
less guidance for their outlook in this quarter and beyond.
The continued uncertainty in the US economy translates into market
volatility. It sure feels like a pressure cooker.
Here are some of the results:
- Investors are conditioned to react to the flavour of the day,
confusing as it may be.
- More investors are taking flights to safety. By primarily cashing
out positions, or switching to fixed income vehicles such as bonds.
- Capital spending by business has yet to improve. This casts
more uncertainty.
Traditionally, September has been brutal to stock markets. In the
last 25 years, we’ve had 19 years of down results in September.
Recent figures show September declines for the Dow Jones index
of -4.6% in 1999, -5% in 2000 and -11% in 2001. The first trading
day of September 2002 continues this trend for now. It's still in
the holiday mode.
Investors continue to feel like those purchasing managers who are
having trouble figuring out the near term business climate so that
they may place the corresponding orders. One piece of good news
shows that corporate insiders are buying more of their companies'
stocks.
Clearly, investors have to look beyond the school aptly named “what's
happening today”. They have to make informed decisions while
at the same time sifting through heaps of information.
Here is some investor food for thought:
- Concentrate on areas that can be controlled, such as risk,
time horizon, diversification and asset mix. Therefore, chasing
past performance is a mug’s game.
- Confidence in the strategy minimizes temptations for second
guesses along the way.
- Discipline helps stay the course throughout the inevitable
correction periods. Assume more are on the way where some can
be dramatic, frequent and lengthy.
- Patience with the investment strategy reduces the impact of
market volatility. A longer time horizon increases the probability
of success.
- Filter the daily volumes of information instantaneously available
from various sources. Listen, but don't get distracted by the
noises of the day.
In my experience, investors who adopt these strategies achieve
better long-term results, and sleep well during the long-term wealth
accumulation process.
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