How do you handle rough performance?

[hendi_alex]

'Fairly valued' is a pretty illusive thing to be stated with such certainty. With both P/E's and earnings elevated to the upside, earnings being near an extreme, those favorable valuations could be more illusion than substance. We are forced to make investment decisions while the fed is pouring liquidity into the system plus giving a strong shot of adrenaline in the form of near zero rates. Also they are acting as a holding tank to keep a gazillion dollars worth of mortgage assets off of the market. The one thing that we know for sure is that such action by the fed causes price dislocations and causes bubbles or bubble like asset inflation. It is hard to know exactly where those bubbles are forming however. I would suggest that one effect is earnings inflation for the companies of most DG types of stocks as well as for other equities. So IMO it is really impossible to determine 'fair value' based upon reported metrics. The best we can likely do is accumulate based upon those metrics, but I'm taking them as a grain of salt at the same time, and am convinced that with more normalized fed policy, earnings and p/e's will makes serious adjustments. Even if the Fed doesn't normalize, then the market at some point will correct the problem, most likely not in a very investor friendly way.

Everyone says to not time the market. I disagree with that and would much rather invest at a slow pace when the market seems top heavy, and invest more briskly when the market seems to present deep value in strong companies. I also believe in keeping a cash weighting. The cash weighting is greatest during times like these, when the market and most DG companies are over valued and the cash weighting is least when those stocks are trading at valuations that clearly represent deep value.