Focus on the 5 Things That Really Matter

I was out of the office yesterday — did I (heh heh) miss anything?

US markets took a 1-2% shellacking, we have a new Fed Chair nominee, a new iPad event is scheduled for 10/22, and political situation in DC remains an embarrassing mess.

And my surprising takeaway about this is that very little of this matters very much, and none of it matters a great deal. That was what I gleaned from a number of very interesting, very knowledgeable speakers and panelists at our conference yesterday. I will eventually post some thoughts on what I took away from the day’s events, but suffice it to say there was wisdom aplenty to be learned.

For now, I would suggest that investors turn down the noise and focus on the signals that actually do matter:

1. Valuation: How are stocks valued? Are they cheap or are they expensive? (Keeping in mind that cheap stocks can get MUCH cheaper, and expensive stocks can get MUCH dearer).

2. Trend: What is the economy doing in sum? Is it expanding or contracting? What is the market doing — rising, falling or range-bound?

3. Inflation: What is the overall trend in inflation? Are prices rising or falling or stable — and how rapidly?

4. Earnings: Are companies able to grow their top and bottom lines?

5. Credit: What is the cost and availability of credit?

There are lots of other elements we can talk about — but if you understand these  five things and get them more or less correct, you are ahead of 90% of your fellow investors.




Lose the News (June 2005)

Who Do You Trust? (January 2008)

The Price of Paying Attention (November 2012)

Avoid the Noise (January 2013)

Things I Don’t Care About (January 15th, 2013)

What Do You Control? (May 30th, 2013)

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