Plenty is working against this market. Here’s why I’m staying invested anyway
We all know I am not allowed to own individual stocks. But I am permitted to own index funds, and I have methodically invested a decent chunk of my earnings each month into an S & P 500 index fund. Sometimes I want to balk so badly that it is palpable. Nothing is happening that I think should be happening, so maybe I’ll skip contributing for a month. Just keep it in cash. That’s in sync with what we are doing in the Investing Club, where we have a ton of cash. Sure, there are always individual stocks I want to own; you see them in the charitable trust. But the fact is, I don’t have a strong case for owning stocks at the moment. We are heading into an earnings season where expectations, at last, seem too high. It isn’t like the off-cycle earnings reports we have seen lately have been dazzling. We don’t get much encouragement from the world’s stories. Why aren’t the Saudis fighting back after attacks by the Iran-backed Houthi rebels in Yemen? Why are we siding with the Russians just to get some diesel fuel? I can’t imagine how many presidents are rolling over in their graves on that one. There is no end in sight to the war in Iran. And the narrative that Iran will just collapse because there is no new money coming in from oil is antithetical to this extreme regime, which prides itself on a spartan life. The possibility that these faceless leaders might make a deal to prevent being overthrown was dead when the country decided to murder its dissenters before the war began. Europe has crept back on the scene in a real negative way, this time with France on the hot seat. The country is dealing with a growing debt crisis, a budget deadlock, and widespread protests. I don’t think France will precipitate a crisis because the EU — post the 2011 European sovereign debt crisis — has mechanisms to deal with wayward members. The real problem is that there are plenty of people who are probably betting the wrong way (à la Situational Awareness ) on France, and maybe on Japan, for that matter. There will be no end to the negative international headlines. Of course, the worst of all is the increasingly hostile attitude toward data centers and the companies investing in them. I look at the world’s largest company, Nvidia, as the bellwether, and there is no doubt its stock is stuck. The AI chipmaker can’t get rid of the perception of circular financing and concerns that there will be fewer clients due to data center bans. Rather than cloture, the midterm elections may bring affirmation of a rolling building ban. Given that the only real oomph in the entire economy is coming from the data center buildout, it is difficult to see where the market’s energy will come from. After all, the Federal Reserve is hell-bent on getting inflation to 2%, and its moves are raising yields at the long end of the yield curve — although most just say that’s caused by inflation or supply-side factors. We seem to be headed inexorably to a 6% and change yield on the 30-year Treasury bond, at which time we are going to lose whatever is left of the housing market. But that got me to thinking something. If you are investing for the next month or two, I can see how you might want to skip October. I know that September is historically the worst month, and it is only anecdotally terrible; we have the 1929 and 1987 crashes to thank for what is otherwise a pretty successful time in the market. It only feels like a crash because it always feels like one right now, for one reason or another. So what did I do? The money is meant to be invested for the long term. I can’t and don’t trade it. My hope is that Fed Chief Kevin Warsh actually does bring inflation down to 2%, and that interest rates will go so high that they pressure lawmakers in Washington to rein in the federal deficit by cutting some spending here and there and increasing taxes to stop the lunacy of this deficit. It hasn’t happened yet. And it won’t happen in October if I decide to skip my October contribution. But if I truly believe that Warsh is a man of his word, that he will not fold under a president that wants rates cut, then I have to keep putting money to work in the market. Plus, like staying in shape, investing has to be done regularly. I genuinely think that after all these years of automatic contributions, if I skip one, many others will be skipped. I look back and wonder what would have happened to my savings if I had looked at that day’s headlines and decided I was crazy to put money into this market. The answer? I probably wouldn’t have as much money saved for retirement. So I close my eyes to the short term. I accept that by buying the S & P 500 index, I end up owning many stocks I hate — unlike you Club members, who can choose individual stocks to buy. I invest knowing that, as crazy as it has been, I have made a lot of money with stocks. And as crazy as it might be, I believe I can do so again. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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