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Economic Oceanography


As I look out my window, I see the beautiful Chesapeake Bay, where it enters the Atlantic Ocean.  Even though it normally looks placid and peaceful, I know there are many currents I cannot see.   Millions of gallons of water flow by every day, slipping beneath the surface of the Atlantic Ocean as the water drops into the Norfolk Canyon, falling to greater depths.  I cannot see any of this but know it is happening anyway.

The “market” is the same – there is so much that is not visible.  For the month of march, the S&P 500 index of large companies was down 2.54%, flat for the first quarter, but up 13.99% over the past twelve months.

The S&P index of small companies was up 2.04% in March, flat for the first quarter, and up 12.68% for the past twelve months.

Preferred stocks, yielding an average of 6.51% in dividends, were up 0.52% for March, down 0.55% for the first quarter, but up 3.08% for the past twelve months. 

Utilities were up 3.76% for March, down 3.30% for the first quarter, and up 1.89% over the past twelve months.

Technology stocks were down 3.9% during March, up 3.39% for the first quarter, and up a whopping 27.68% over the past twelve months.

So, what does all this tell you?  It should tell you that you are too focused on investment performance in the short term.  All these currents — and many more — change constantly.  I’ve spent many years looking out the window, and the Chesapeake Bay always looks the same.  Warren Buffett famously said he had no idea where the stock market would be next month, but he knew where it would be in ten years — UP!

Just because so much detailed data is available, it doesn’t mean you should care.

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