Surprise, Stocks Do Go Down!

It has been a few weeks since I put out some commentary on the market and 2014. The bulls to bears are just about even so we have a 50% chance of going up and a 50% chance of going down. Now that the great year of 2013 is slowly fading in our minds; I am starting to receive the “nervous Nellie calls” about what looks like to be a normal correction in a secular bull market. Remember my mantra: bull markets don’t end until money dries up-and that is far from tapering.

One of the indicators I use is the contrarian signal. It shows that the retail investor always has perfect timing of coming back in the market at the height of overbought conditions. This is exactly what happened in January with an increase of retail investor’s activity rising 30%. We have done very little buying in fact we have been “pruning” (taking profits) just like an arborist does to trees so that he will get better blooms in the spring.

There has been a 5% correction every quarter for the past few years but it has been somewhat masked by buyers stepping into the market. What is upsetting the investors today is volatility has not been a factor for the last two years and now we are seeing 300 point moves.

Taking a long term view what we are going through now is healthy for the long term and wealth creation. This repricing will end and the next leg up for the secular bull market will continue. The biggest mistake that investors make in markets like this one is being too bearish and selling. I have always erred on the side of being too bullish because I look at where my portfolio will be at the end of the year instead of the end of the week. I am looking for entry points not exit points. This is not 2008 and no one is talking about recession (in fact GDP going forward is showing improvement even better than most think).

Bill

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About billriley

Chief Executive Officer, Chief Compliance Officer A co-founder and shareholder, William Riley is a 33 year industry veteran, who observed, many years ago, that over time institutional investors typically outperform individual investors while accepting less risk. In his role as Chief Executive Officer, Bill works tirelessly to make the wealth management strategies used by the world’s wealthiest families and largest institutions available to our firm’s individual clients. Bill combines fundamental and technical analysis to minimize investment portfolio risk and maximize potential returns. He uses a variety of non-correlated asset classes, including alternative investments, to minimize portfolio volatility and seek absolute returns in down or flat markets. Finally, Bill believes in a comprehensive approach to wealth management that fully coordinates and seamlessly integrates portfolio management, risk management and asset protection, trust, estate, tax and charitable planning. Prior to co-founding Riley Wealth Management ,LLC, Bill held management positions at Merrill Lynch, UBS, Raymond James, Paine Webber and J.C. Bradford. Bill founded Fort Worth branches for Raymond James and J.C. Bradford. Prior to entering the financial services industry, Bill ran his families closely held businesses. Bill’s experience operating family businesses combined with his wealth management experience makes him uniquely qualified to advise entrepreneurs and business owners on a variety of matters including complex and sensitive issues relating to business succession. Bill’s degrees and designations included a Masters Degree in Business Administration (MBA), the Chartered Financial Consultant designation (ChFC), the Chartered Life Underwriter designation (CLU) and the Wealth Management Specialist designation (WMS). A Fort Worth native, Bill is a TCU alum and active in many civic and charitable organizations. Bill and his wife, Marsha, now reside in Colleyville, and they have four grown children and four grandchildren. When he is not working on portfolios or studying financial markets, Bill can be found on the golf courses of Ridglea Country Club.
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