NEW YORK (TheStreet) -- Markets are never-ending auctions. Prices rise and fall based on fundamentals and psychology. If you can spot the difference, you can buy the dips and make money. If you can't, you can be wiped out.
Many small investors were wiped out in 2008-2009 when the Great Recession made fear contagious. On the heels of 2013 in which the S&P 500 surged 29.6%, it's certainly understandable to get nervous about this most recent decline. S&P has lost 5% since the start of this year, prompting some traders to put out the "sell" signal.
Are they right, are they wrong. Frankly, I think they're wrong.
The reasons are fundamental while the fear is borne of failing to see the engines our new economic recovery.
Exhibit No. 1 is energy. Energy production keeps rising in the U.S., turning the present West Texas Intermediate price of over $96/barrel of oil from the bad thing into a very good thing. Increased domestic energy production not only keeps more money in this country, it drives up the value of renewable energy.We also have a direction for technology, the cloud, with companies like Google (GOOG) and Amazon.com (AMZN) now investing billions of dollar in these new data centers while rivals seek out ways to capitalize on this historic transition in information storage. These trends are fundamental. They will continue to drive the economy forward until energy costs start eating into the value of proven reserves, or First, because of the eventual end of the Federal Reserve's bond-buying stimulus program. The unwinding of the Fed's massive program has some investors fearing a return of more expensive money, forcing stocks to have to compete with loans for increasingly scarce capital. These traders say, "don't fight the Fed," and if the Fed says interest rates are going up, then stocks have to going down.
That may end up being true, but it's not a bad thing longer term and doesn't automatically auger for a lower overall market in the short-to-medium term. It does mean that savers can get a return, for one thing, adding to our growing prosperity. It means there will be new instruments to invest in. It means a strong dollar.
All together, these are trends that ultimately make the economy stronger, not weaker. It's a great excuse for a correction, but not a crash. There is a second reason for stocks to fall right now. A large number of followers of "Austrian" economics - like David Stockman, Peter Schiff, and Paul Craig Roberts, along with a host of gold bugs - are convinced we're about to crash for political reasons. Many investors listen to these doomsday pundits adding to selling pressures whenever stock prices get volatile. If you agree with their analysis, you're free to vote with your money. But I think they're wrong. I think they're as wrong as they can be. Gold isn't money. Money kept in a vault isn't money. It could be money, if it were exchanged, if it got off the couch and got a job. But it won't, because it's scared, and ironically the only thing that might create a bout of real inflation would be if that money, indeed, went to work. My advice is to pass that money another beer and ask if it's comfortable. Every recovery is different. The last recovery was driven by housing, and ended when the housing bubble burst. The previous recovery, like this one, was driven by technology, and ended when that technology got its full price, when everyone became a bull and there was no one else to sell to. The current recovery is driven by energy and cloud technology. Energy prices aren't about to crash, there's not yet enough supply for that to happen. Clouds are only starting to show what they can do. Let the fear continue. When you see bargains, buy with both hands. I think your patience will be rewarded. At the time of publication the author owned shares of GOOG and AMZN. Follow @danablankenhorn This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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