In the words of one of the greatest hockey players of all time, Wayne Gretzky once said, “You miss one hundred percent of the shots you don’t take.” Pause for a moment and take in the universal truth of this profound statement from an unlikely source. I say “unlikely” because it is not from a great economist, author, inventor, or titan of industry. This came from a common athlete who knew one thing about a game (one could say the game of life) that drove him to the pinnacle of sports.
Many would agree that sports and business share many similarities as to the character, effort, determination, and teamwork it takes to move a business to its pinnacle…if you take the shot. How about the average investor? Have they gotten the returns that are available to them…if they took the shot? Well, let’s look at an area that usually tells you the truth about the long-term, real life returns that real people get — follow the money (or the puck).
Unfortunately, concerns about the economy have moved many investors’ assets into cash1. In March of 2009, at the market bottom with the S & P 500 trading around 666, the amount of cash equivalents on the sidelines for individuals was $8 trillion, while corporations had $2.1 trillion. Now, over two years later (as of April 2011) and one of the greatest stock price recoveries seen in modern times-over doubling of the March lows with the S & P around 1,329. Households still have $7.9 trillion in cash equivalents and corporations have actually increased their liquid assets to $2.3 trillion. Why haven’t they shot the puck?
Investors continue behaving themselves away from participating in past returns and potential future returns because the comfort level for them to “trust the markets” has frozen them into waiting until they get a better opportunity, in my opinion. In the same sense, businesses will continue to trend sideways if they are unwilling to take the chances needed to grow their companies. These are usually the times (when things seem dismal) when market share can be gained. The question that both business and individual investors need to ask is, now that your still holding the puck, are you ready to take the shot?
1) Cash flow numbers from Nick Murray Interactive Newsletter- June 2011
Past performance is no guarantee of future results. Investors cannot directly purchase any index.
This article was written by Lou Melone, Managing Partner with Budd, Melone & Company in Auburn Hills, MI. Lou Melone can be reached at 248.499.8704.
Dbusiness.com- Article XIIII, Issue II
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