Fiona

Fiona is the daughter of Susan Herrmann Loomis, who gave the cooking school that we attended last October in France.  This is a true snap shot.  Eight of us were having morning coffee and rolls in a small cafe prior to sallying forth to a farmer's market.  Out of the corner of my eye, I noticed that Fiona was well lit and rather attractive.  I picked up the camera from my lap, turned in her direction, and quickly took one shot.  This is a cropped version of that photo.  Her mother is quite pleased with it.

I'm pleased with it also for several reasons.  One is the composition.  The second requires some explanation. To me, this is a travel photo. Travel photos should evoke a sense of place. People in different countries these days more and more wear the same clothes, but in each country they have a different body language.  Fiona is a 13 year old French girl. I do not think that you would find a 13 year old girl that would carry herself with quite the same poise in the U. S.  To me, Fiona's body language and the way she wears her clothes is uniquely French.

New Year Market Outlook

In August I wrote that the stock market was becoming more of a buy than a sell.  Since then it has done very well.  Where do we go from here?

Every year major publications such as Barrons and Fortune, and individual services such as J. P. Morgan View, forecast the course of the market for the coming year.  This year the consensus is optimistic.  Maybe 6% or 7% growth.  (By the way, the consensus is almost invariably optimistic.  I recall that in early 2000, just before the dot com crash, Abby Joseph Cohen and others were very confident in 7% growth.)

On the other hand, among individual financial writers that I follow and respect the warnings of a major financial collapse have reached a crescendo greater than any I can recall.  They cite contrarian indicators such as the fact that individual investor optimism is at a high and that financial successes (Facebook, Netflix) are major front cover stories.  This pessimism is synchronous with their general disgust with U. S. Government policies.

So, what's a boy to do?  I collect aphorisms of stock market wisdom. (This is like memorizing the Bible.  You can find a saying to support any point of view.)  Nevertheless, the one that comes to mind is: "When everyone believes the stock market will go down, it will probably go up.  When everyone believes that the market will go up, it just might go up."  My sense is that this market has not gone up for very long since a major bottom.

Earnings growth will continue but will not drive the market.  Earnings growth in percentage terms was high last year because the year before was a disaster.  Those percentages will be hard to repeat.  However, people will begin to realize that we have ended a major, 30 year long, bull market in bonds. Interest rates can go nowhere but up.  Bond prices can go nowhere but down.  Consequently there will be a major movement out of bonds and into stock.

In summary, stay the course.  In particular, if you are saving for retirement continue dollar averaging.  Avoid bonds and most bond funds.