Most people are wrong about investment most of the time. A couple of years ago, if you had held on to a large diversified portfolio of stocks through the vicissitudes of the prior decade, your return had probably been about even or slightly negative. Right after the lows of the bear market a few years back I heard and read scores of people in the media dismissing stocks because of their historical lack of return. I can remember when, at the booming crescendo of a stock-market bottom, people, even smart people, even good investors, even people on the news who knew nothing about markets, told us that we might want to consider selling our stocks, even after the market had plummeted and those sellers of stocks were going to take losses, sometimes life-changing losses. I said to myself, "This must be the bottom." And, yes, I was buying stocks there at the bottom, but I already had much of my savings in my deflated portfolio and didn't have as much capital as I would have liked. That is why I am still buying today.
Even recently I've heard people dismissing stocks both in the media and in everyday interactions. Of course, those who claim that stocks are no longer a good long-term investment are horribly wrong. That stocks are so under-owned as an investment class is the best argument for holding stocks for the long run. I look for superlatives in the media, negative superlatives, and buy stocks when I hear them. You've heard the negative superlatives, like longest weekly losing streak since 2001, which almost happened this week, and crisis, like the Greek-crisis, you know the violent Greek crisis, whose footage we were forced to watch all week. Shouldn't we be nervous, very nervous as investors? After all, CNBC says we should be nervous. Shouldn't we sell? No, we should buy. The media has been so negative lately on stocks that we must be close to some sort of near-term low, which we may revisit later this year but which I am going to exploit to earn a little money.
If the Greek crisis really is a crisis, why does it still cost me about $1.50 to buy one Euro? Perhaps Euros are so expensive because they're colorful and come in different sizes or because the smaller the denomination, the smaller the rectangle the currency is printed on; that's all truly amazing stuff, but the currency market usually doesn't get valuation wrong. And the currency market is signaling with the strength of the Euro that the Greek crisis isn't a crisis. If I'm wrong and the market tanks because of a Greek restructuring or default, I will roll up my sleeves and buy equities, as many as the panicked traders on Wall Street will sell me.
Last week while investors nervously watched the violent Greek protests and nearly everyone interviewed on CNBC was predicting that markets would fall precipitously, I added to my portfolio. I bought Nucor (NUE), a U.S. steel-maker. In early April the stock traded at about $47.50 and now trades just under $40 on slowing global growth concerns and a perceived slower future demand for steel. Like the broader market, NUE is oversold. I have owned the stock before and traded it within a few weeks of purchasing it for a profit. My sense is that I will again be selling NUE for a profit within the next month on a bounce after Wall Street's erratic pendulum swings to the all-clear-stocks-look-cheap signal (to mix metaphors thoroughly). If the stock does not rise to the level that will give me the profit I want, I will hold it and collect a dividend yield of 3.66%.
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