What to do?

Many times it seems that “action” is better than no action. When we see things happening around us we want to “do” something. Recently the stock market has moved up quite nicely and you begin to wonder “did I miss the boat?” I do not have a crystal ball but I have been saying for several months that you need to have a game plan that makes sense rather than reacting to the stock market. The game plan I am pursuing is one based more on historical information than on what is happening with the stock market day-to-day. Historically the month of September is the worst month for the stock market. I think this occurs because investors realize that while gimmicks and onetime adjustments (such as lowering employees pay or not buying equipment now that you know you will need later)can work in the short-run you cannot build business profits using these methods. Ultimately, growing profits move stocks higher. The expectations in the first and second quarter for earnings is fairly small. By the time you get to third quarter earnings the expectation is much greater. Third quarter earnings are the last earnings we will see for the year since year-end earnings are not reported till the following year. It seems that the worry about what the third quarter results will show tends to drive the stock market down. Will that happen this year? I don’t know what will happen in the future but I don’t think you want to increase risk in your portfolio at this point in time. Ed Mallon