It Isn't What Happens, It's What You Think About What Happens

Today is February 26, 2008. Today the business headlines are:
-new data show rising inflation and declining home values
-foreclosures at record levels
-consumer confidence at its lowest level in 5 years
-worries that if the Fed lowers interest rates, it will pour gasoline on the fire of inflation, and if it doesn’t, nobody will ever buy anything ever again, ever.
-Serbs attack US consulate
-Taliban interferes with NATO
-virus on cruise ship sickens dozens (are you starting to wonder why people get on the damn boats in the first place? “Honey, for our vacation, let’s get on a huge floating Petri dish packed with people with less brainpower than a fruit fly and the manners of a slug, eat outrageous amounts of food and catch a virus. Maybe it’ll even be a deadly virus!”)
Where was I?.....Oh, yeah, so in the light of no good news whatsoever, death in the buffet line, and perhaps the beginning of the end of the world economy, the Dow Jones Industrials are up 100 or so points.
If your fund manager had read today’s headlines yesterday, he would have sold out all his equity positions, and you would have thanked him for doing it. Don’t waste my time telling me you or he knew the news wouldn't hurt the market, and that the markets earlier corrections had already “predicted” this news. He didn't, you didn’t and the market didn't. There's an old saying, 'the market has predicted 7 out of the last 4 recessions.' The tea leaves only tell you what you want to hear.
Economies shift, all day everyday. Companies make good decisions and bad ones. Things wear out and get replaced, the population grows. More things get bought. Companies make money. Over time, this plays out in higher stock prices. In between, there are the zigs and zags of human behavior. Which is why the thing doesn’t go up in a straight line, and why you get a higher return for accepting the volatility.
The point is the same as it always is. There are no accurate predictions of future prices. Don't pay for what you can't get.