BY DAN VALENTI

PLANET VALENTI NEWS AND COMMENTARY

(FORTRESS OF SOLITUDE, WEDNESDAY DEC. 12, 2018) — There’s much going on about water these days in Pittsfield, as the readers of this board know. Whilst THE PLANET has been traveling, as it were, reports from our spies, gumshoes, Secret Squadron, and elite Z-Agents have been streaming in to provide an overall picture. We are still gathering intelligence and will have something to say about it forthwith. Today, though, we switch to another situation just as fluid an no less vital: the stock market.

Some on this board love to point out the stock market when it’s tanking, saying that it’s somehow the fault of the President. Funny, when the same market rockets into the stratosphere, they say nothing. Fact is, the President has little to do with the performance of world markets. Some, but little. Alas, though, he’s the head coach. When the team wins, the players get the credit. When it loses, it’s his fault. It is, or should be, a Big Boy game.

It reminds THE PLANET of a favorite story concerning the late John D. Rockefeller. The Rock, returning from Europe, faced the press dockside. A young reporter asked him “What will the stock market do?” Rocky gave a wizened smile and answered, “My boy, the stock market will [PAUSE] fluctuate.” He delivered the line with timing worthy of Johnny Carson in his monolog.

The U.S. stock market, the world’s most watched and influential, reacts to internal business pressures, domestic events, politics, and foreign affairs, the latter more so than ever given the global nature of the world economy. Transactions move at an insane pace, 24/7, thanks to the internet. Tiny fractions of price flux result in huge numbers of shares being bought and sold globally in fractions of a second. It’s a crazy scene.

How investors react can be seen as a financial ink-blot test. The recent market losses provide a great example. Chicken Littles, including those who play the Russian Roulette game of “timing the market,” panic. If they’re in the market, they sell at the worst time. If they’re Monday Morning Quarterbacking without skin in the game, they provide gloom-and-doom pronouncements tied to their partisan political prejudices. Those with cooler heads play for the long term. They include Warren Buffett, whose philosophy never loses: “When everyone’s selling, I’m buying. When everyone’s buying, I’m selling.” Investors like this see falling prices as an opportunity. They buy low. They keep, keep, keep, then take their profits. They don’t try to time the market summit. They remain content with modest but consistent profits. Over time, the strategy does not lose.

When the smart investor hears reports of a falling market, he either does nothing or buys. Unless you believe the United States and all the companies in it — still the world’s leading economy — will literally disappear, the market will press on. In short, it will “fluctuate.” This means an eventual rebound that over time will wipe out current losses and generate new profits. That’s how the stock market has worked for its entire history, and there’s no reason to expect this time around to be any different.

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Playing the market is gambling. Investing in the market is an educated bet, an expression of faith based on traditional measures of value. The market has its own “grammar,” a term not to be confined to language. In its most general sense, grammar consists of the established forms and protocols that govern a particular field, action, or endeavor. To be a good “grammarian” with stocks means that one knows and adheres to those established forms. Again, it’s no secret how to win: Buy low, hold long term, and sell when you’ve made a profit.

If it’s so simple, why do so many people lose?

Greed, that Imp of the Perverse (thank you, Edgar) who spoils everything touched by human hands.

The concept behind the stock market is simple. Let’s say Company A goes public with a worth of $1 million. It issues 100 shares, each valued at $10,000. If the company does well, value increases and the price of the stock goes up. Ina bad year, the price goes down.* (*EDITOR’S NOTE: This does not include the dreaded “public-private partnership” of the Richard Stanley-Beacon type. There, when the enterprise soils the bed, investors and politicians use public money to artificially prop up performance, profits guaranteed). When Company A’s value drops to $750,00, each share now costs $7,500. Shareholders, if they think more losses are on the way, offer shares for sale. Buyers, who believe Company A will rebound, buy low and hold long term. “Winning” or “losing” depends on the company’s future performance.

The moral of all this is to ignore those instant pronouncements of gloom regarding day-to-day stock prices. America has its share of problems, but it’s not going anywhere anytime too soon. There’s reason to be bullish long term. THE PLANET‘s recommendation:

Buy.

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“Every day on Earth’s another chance to get it right” — Steven Earle.

“OPEN THE WINDOW, AUNT MILLIE.”

LOVE TO ALL.

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