The Investment Scientist

Is the Sky Clear Enough Yet?

Posted on: November 9, 2011

[I wrote this two weeks ago.]

clear sky

Clear Sky

On September 12, a client of mine called me to get out of stocks altogether.

He used a vivid analogy: “The storm is raging; I will wait until the sky clears before I get in again.” The storm he referred to was the European debt crisis. Judging by my many interactions with investors, he is not alone.

This morning, I woke up to great news: the Europeans have finally hammered out a debt deal in which Greece only needs to pay 50% of what they owe to the banks. With this debt reorganization, it looks like we will not have a Greek default (even though this is really a default by another name, but that’s the subject of another piece).

One might says the storm has dissipated a bit, but stock prices are already 10% higher than they were on September 12.

But is the sky clear enough yet? Doubts about the deal linger. CNBC calls the deal, “Long on Intention, Short on Details.” Shall we wait until all details are in place before we get back into stocks? How much higher would prices be when that happens? 20%? 30%?

The whole idea of investing only when “the sky is clear” is flawed. When the sky is clear, it can’t get any better; you can be sure another storm is brewing just beyond the horizon.

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1 Response to "Is the Sky Clear Enough Yet?"

Reblogged this on The Investment Fiduciary and commented:

Wise words written by myself two years ago: “The whole idea of investing only when “the sky is clear” is flawed. When the sky is clear, it can’t get any better; you can be sure another storm is brewing just beyond the horizon.”

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Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC. He is also a regular contributor to Morningstar Advisor and Physicians Practice. To explore a long-term wealth advisory relationship, schedule a discovery meeting (phone call) with him.



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