WHAT IS "THE MARKET" ANYWAY? - By Charles Payne

Oct. 22, 2014 10:43 AM ET

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Long/Short Equity, Portfolio Strategy

Seeking Alpha Analyst Since 2009

Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political, and general opinions by several prestigious news organizations. Currently, Mr. Payne is a contributor to the Fox News Network and Fox Business Network. He also hosts his own radio show on KFIAM 640 every Saturday from 2-4pm PST. Mr. Payne recently released his first book entitled Be Smart Act Fast Get Rich. Our all-star analytical team is called first when the media needs to know. We are regularly featured on several well respected finance-oriented radio and television programs such as Fox, CNBC, BNN, WSJ to name a few and widely recognized in the media as a leaders in the analyst community. In addition, Wall Street Strategies is part of Thomson-Reuters Consensus Estimates. Brian Sozzi is an equity research analyst specializing in the softline/hardline goods sectors of the retail industry for Wall Street Strategies Inc. Mr. Sozzi graduated Summa Cum Laude from Dowling College, receiving his Bachelors of Business Administration with a concentration in Finance and Accounting. Routinely sought after as a trusted point of reference for opinions and insight on the global economy and retail sector stock evaluation, Mr. Sozzi is a frequent on air contributor to CNBC, Fox Business Network, and Bloomberg, and is cited regularly by online/print publications that include Forbes, Bloomberg, The Wall Street Journal, Thestreet.com, CBS Marketwatch, Reuters, Seekingalpha, Associated Press, Crain’s NY Business, Fortune, Barron’s, AOL Finance, and the Financial Times. In 2009, Mr. Sozzi became recognized by Starmine as a top-ranked equity research analyst for stocks under coverage in such categories as EPS Estimate Accuracy and Industry Excess Return. Carlos Guillen is an Equity Research Analyst providing coverage of the technology sector for Wall Street Strategies, Inc. Mr. Guillen has had experience working in both the sell side and the buy side. Prior to working as an analyst, he was a Design Engineer for Lambda Electronics. Mr. Guillen holds an M.B.A. from NYU’s Stern School of Business, and he has a B.S. in Electrical Engineering from Manhattan College. David Urani is a research analyst with concentrations on the homebuilding, staffing, medical devices, and logistical services industries. Along with providing institutional clients with up-to-date reports of individual stocks within his industry coverage, David assists the rest of the Wall Street Strategies research desk with timely analysis of vital economic data. A graduate of the A.B. Freeman School of Business at Tulane University, David earned a Bachelor of Science in Management while majoring in finance. With prior training experience running small businesses, he has an eye for key fundamentals that keep Companies running efficiently. David’s insight has been featured in several outside sources, including the Fox Business Network, MarketWatch, and SeekingAlpha. Carlos Guillen is an Equity Research Analyst providing coverage of the technology sector for Wall Street Strategies, Inc. Mr. Guillen has had experience working in both the sell side and the buy side. Prior to working as an analyst, he was a Design Engineer for Lambda Electronics. Mr. Guillen holds an M.B.A. from NYU’s Stern School of Business, and he has a B.S. in Electrical Engineering from Manhattan College.

We always talk about "the market." What is "the market" to regular people?

Wall Street is not the stock market, it is the physical location of the NYSE, and major brokerage firms where they manage transactions, and should not be confused with long-term investing.
The stock market does not always reflect the economy. Markets move on fear, manipulation, and other non-fundamental factors, typically for short periods of time, but also for longer-term periods as well.
The major indices are not effective proxies of Main Street; everything can look great or everything can look awful, which only angers the public that knows better.

The "Dow" or "S&P" are indexes that are supposed to reflect the entire spectrum of business. The problem is they are older names and might not reflect the hot or exciting parts of the economy. Consider the Dow components that reported this week.

Misses from food, beverage, and technology companies underscore how hard it is to reinvent yourself over and over, while beats in military hardware and insurance show how tough it is for innovation to change those industries.

Company	Year Founded	Year on DJIA
MCD	1940	1985
KO	1886	1987
IBM	1911	1979
UTX	1934	1939
TRV	1853	2009

I am not sure how to communicate "the market." However, I think it is a major stumbling block for those who invest in the stock market and for those who own companies. I will admit there are all kinds of shenanigans that distort value. Fed action is designed to make stocks more attractive, although this time around I disagree; high-frequency trading distorts minute by minute.

Corporate buybacks distorts the intermediate-term health of companies. It is important to read the entire income statement, the cash flow statement, and balance sheet, instead of focusing on the bottom line.

One thing to remember, however, in the longer-term, great companies will have great stocks.

Taking Risks

When the market is all over the place, it is easier for those older Americans who remember the Harold Lloyd classic "Safety First." Nevertheless, when it comes to investing, older folks are more reckless or more confident than the younger generation.

30% of 60-65 have all their investment money 100% in stocks. 52% of 60-65 have 70% of all their investment money in stocks. On the other hand, 39% of Millennials assets are largely in cash, while 13% are heavily invested in stocks.

This chart of the Dow might give us a few clues why this is happening…

If you are sixty-five, the Dow began that year at 1692; now up to 869%, but it has not been a smooth ride. In fact, you would have turned 17 when the Dow peaked at 7000, and drifted for 16- years, losing 73%.

Compare the difference to that of the Millennials; since 1982, the market has been up 670%. However, this age group has experienced two stock market crashes since turning 17, and now has serious trust issues.

I understand that young household wealth is substantially lower than it was twenty to thirty-odd years ago, but delaying investments and the accumulation of assets means retiring a lot later than previous generations.

Average Retirement Age
1991	57
2014	62
2064	73

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