Hey friends. I hope you are doing well! As we approach another fall season, 2022 thus far has seemed a fast-moving time of great turbulence on most fronts. Yet, here we are and God, just as He did when this year and all those before it had their beginnings, remains in control of His universe. He is not wringing His great Hands nor does He slumber, and He tells all those who look to Him in faith:
“Trust in the LORD with all your heart, And lean not on your own understanding; In all your ways acknowledge Him, and He shall direct your paths.” Proverbs 3: 5,6 NIV Bible
Sometimes, it seems the stock market mirrors the mood of our society. It’s just an observation on my part over the years; there’s no empirical evidence I offer. It seems people often are greatly impacted, emotionally speaking, by the current standing of the portfolio. At a time like the present one where the overall market is being tossed about by significant swings and literally hanging on every next thought expressed by the Fed, one feels little confidence about where the portfolio’s current worth will stand from day to day.
As I’ve shared many times, God never intended our inward security to come from any other source other than Himself. My trust must be squarely in Him and in His Son, Jesus Christ, for me to know within myself that I have a certain anchor that all is and will be well with my soul. That assurance that all will be well surely includes the uncertainty of one’s day-to-day financial situation that stems from a stormy global economic climate.
Thus, while I have posted numerous times here over the years about common stocks, the context for my view on stocks, on money, on “fill-in-the-blank” comes from my relationship with Jesus Christ. He died for my sins and He arose and lives to care for me now, during this earthly pilgrimage and forever. Real “rest” regardless of the turbulence of living here on earth can only be found by heeding the first words of the Proverbs verses above — “Trust in the LORD with all your heart.” I have found that when I fully rely on Him plus nothing, I’m fully satisfied. It is indeed a rest that can’t be had with a very vast portfolio of the world’s assets.
My book, Choose Stocks Wisely, reflects my regard for an eternal truth that all things come from God and thus I’m just His steward. If the particular stewardship is that of money, I want to employ God’s money to His glory. Taking risk is part of garnering a return. Taking unmeasured risk is gambling. Making the effort to measure risk doesn’t prevent loss from occurring at times but the downside risk is carefully considered and viewed as justified before the investment is made. With stocks, risk is measured primarily by the health of the balance sheet assets in terms of their amount and composition. My book offers a way of analyzing risk by addressing how to analyze the quality and quantity of balance sheet assets to determine if sufficient, quality equity protection exists at the time an investment is made. Return on investment prospects shouldn’t be ignored and my book doesn’t advocate ignoring outlook. But the flexibility to attain a favorable outlook stems from a solid financial foundation in place already.
This is a time of heightened risk in the stock market. Analyzing the balance sheet is all the more important. I hope my book, Choose Stocks Wisely, continues to be a useful tool in reviewing the net assets accumulated to date for any potential investment candidate.
See you next time.
I agree.
This is excellent advice. We need to be prepared for turbulent times as best we can as stewards and trust the Lord Jesus Christ for everything. At least this is what I’m trying to do. Maranatha!
All true. You will not hear these eternal truths in the Wall Street Journal, Bloomberg, or similar media. Thanks, Paul, for reminding us about what is really important.
Dear Dr Allen
after a few years I am re-reading your excellent book. To analyze the financial health of a company in addition to the adjusted current ratio, why don’t you also consider the level of debt, e.g., the debt to equity ratio? A company can have a good current ratio, but a debt to equity ratio above 100. Wouldn’t that be risky? Is the current ratio alone enough to determine the financial strength of a company? Thank you for your attention
Thanks for the comment on my book, friend. Your (same) comment shows up relative to 2 different blog posts. I’ll just reply once to this one. The second quality standard, namely the “adjusted tangible stockholder equity” requirement of at least zero in combination with assuring that the first quality standard, namely the adjusted current ratio, is met actually considers the level of debt relative to the amount and nature of assets needed to satisfy all debt at the time of your balance sheet analysis.