Paul Lim's "Fundamentally" column in the New York Times is often a source of fertile investing ideas, but at the same time, it's good to remember that it's just a newspaper column, and susceptible to creating concern where none might exist. In yesterday's article, Lim cautions that the stock market rally seems to be petering out: The S&P 500, which gained 62 percent from March to mid-October, has climbed just 4 percent since then.
Let's contemplate those numbers for a moment. A 62 percent rise over the course of six months is an annual increase of well over 100 percent - it's safe to say that no one expected that rate of increase to last for any length of time. And a 4 percent increase over the past three months equates to an annual increase of 16 percent. Most of us would be very happy with returns like that.
Similarly, Lim laments that the S&P 500's earnings, which were forecast to be up a whopping 200 percent in the fourth quarter of '09, are expected to rise somewhere between 22 and 38 percent in each of the next three quarters. A 200 percent rate of increase is obviously unsustainable; a rate of increase around 25 percent per quarter is most welcome.
Newspapers have to have an immediate hook to their stories to get people to read them. But if you're invested for the long term - which I certainly hope you are - you should have a longer view than most newspaper columnists.
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