I found this blog stuffed in a small corner of my computer. I wrote it in 2010 and never published and thought it may fit just as well today as the day when the grass was green.
Yesterday, around lunch hour, I stopped by the golf course to smack a small bucket of golf balls at the range and started talking to the pro and a few other guys in the club house who all wanted to know what the hell was going on with the stock market. That was the day the South Koreans had about enough with North Korea and one or the other broke off relations, and Spain had bailed out a small bank and the euro was down again and home prices fell for some inexplicable reason and the Dow was off 2oo points and the S&P was approaching April, 2009 level. Oil was below $70 and gold was trying to make another run. It was a day with a lot happening but no clear cut reason why our markets were again tanking and a small group of middle-aged guys were hanging around worried if they were going to lose money just as consumer confidence was returning.
They asked what I thought and I pointed out that they shouldn’t forget the new reform law that was soon going to change the way banks and investment firms did business. All looked at me with that squinty eyed look as they heard broker BS before but I soldiered on, ‘This has a lot of business people scared,’ I explained, ‘and no one really knows how much or little it will impact their ability to loan or their profitability. On top of that unemployment is still a major issue and the experts predict only a small decrease in the numbers before the end of the year. Then you have the European countries with balance sheets that don’t look so hot; namely Portugal, Spain, Italy and Ireland. But, the simple fact is that people are scared and unsure and when that happens they sell risk and run to safety.’
‘Is this a correction or the beginning of a double dip depression people have been talking about?’ One of the guys asked.
‘ I heard the Chief Investment Officer of Northern Trust speak on CNBC today and he said that he did not know and anytime there is uncertainty the professionals simply sit on the sidelines. But, some people think this is simply a correction which has some ways yet to go.’
‘So what can we do?’ Another guy asked waggling a five iron as if he really wanted to hit something.
‘ You can sell all your equities and come back when you feel more comfortable; or you can sell half your portfolio or a quarter or none at all. You can buy stocks that you thought were too expensive a few weeks ago now that they have come down in price, or wait for them to possibly get even cheaper. Another idea is to buy just a little and if the stock goes down buy more. This may be a good time to start picking up some good dividend yielding stocks at a discount. Remember at times like this cash is always king.’
‘All my investments are in mutual funds. I hate the roller coaster,’ another guy said, ‘I went through that in 2000 and again last year and just when I thought things were getting stable this happens. What do you do when all you’re money is invested in mutual funds?’
‘ If you’re still a moderately aggressive investor you may want to shift more into domestic dividend paying funds from your foreign funds. If you are more conservative you may want to increase holdings in the intermediate bond fund just to reduce volatility. If you’re a contrarian you may want to look at emerging markets or global funds and buy them since they’ve gotten a bit cheaper. Then there is Jack Bogle who believes people should have 1% of their assets in bonds for every year they are old. Unfortunately I have never met anyone who followed Bogle’s advise.’
‘What are you doing with your money,’ another asked me.
‘ Telling you how I manage my money or my client’s money doesn’t do you any good. You have to manage your money for your needs and not your neighbors or co-workers. Here we are four guys with different families, backgrounds, dynamics and plans and you cannot use one blueprint and say it fits all of us. If I told you I was 100% in emerging markets it wouldn’t help and neither would it help if I said I was all in cash. There are two things you should remember: (1) Short term don’t put any money at risk then you can afford to lose and (2) Investing is for the long-term . What happens today, this week or this summer doesn’t qualify as long-term.’
I went and hit my small bucket and left the guys to argue what they would do next.
Today in 2011 Libya is in civilian revolt, Egypt is readying for free elections, oil is over 100 a barrel, the markets are growling bearish signals after a huge run-up from last September and gold is at its highest. Investors are saying the same things they said last summer.
(This really did happen only I used a bit of poetic license to organize what was a fractured conversation.)
If you have questions call Paul at 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.
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