Comfort Zone Investing: Hey! This is America

Posted Jan 3rd 2009 10:30AM by Ted Allrich
Filed under: Comfort Zone Investing

Ted Allrich is the founder of The Online Investor and author of the book: Comfort Zone Investing: Build Wealth and Sleep Well at Night. In this weekly column, he'll offer advice to investors who are just getting started.

Several responses to my columns on 2009 expectations and how to invest for the year have been totally negative. They claim I'm too optimistic. The only way to survive is to buy gold. America is finished. The new administration is socialism. The American capitalist system is done. These readers are not students of history.

America is built on hopes and dreams, fueled by Darwinian survivors of other countries with enough energy and nerve to come to a land of freedom where their dreams can become real. We have been peopled by brave and strong immigrants who gave up everything to have the chance for a better life for themselves and their children.

Initially they came from England, but as word spread of a new country with great opportunity, they arrived from Ireland, Italy, Germany, Poland, Spain, everywhere and anywhere. Now they're coming from China, Mexico, India and the Middle East with many on a waiting list as our shores can't absorb everyone at once. The list is long with great people anxious to be free and to pursue their dreams. They want to be Americans.

There is no other country like ours on so many levels. The fact that every four years the people get to vote for a leader and the vote prevails is still relatively new. Sure, other countries have a democratic system, but America is the strongest, greatest country in the world. How easy it would be to try to become a dictator when you hold the reins of power. Not gonna happen here. Too many checks and balances on that power.

The fact that we just voted an African American as president speaks volumes to the evolution of the country as more inclusive, more color blind than ever. Equality for all people got a boost from that election. Everyone is waiting to see how well President-elect Obama's policies will work, but the sense is that almost everyone is willing to give him a chance. Maybe some of his programs won't work. Hopefully some of them will. At least, he's willing to try something new.

Sure, those programs will cost money, lots of money. But if the money is invested rather than simply spent, the return in the form of more tax revenues (not necessarily always at higher tax rates) will pay for them. No one wants to increase the U.S. debt levels. That isn't wise. But sometimes, when events conspire to collapse our economic way of life, unusual and extreme measures are necessary. We've had it before, and when FDR took office many cried "socialist," even "communist," because the government was spending huge amounts of money to help the private sector. The WPA (Works Project Administration) put people to work at jobs that seemed made up at the time. There is still evidence of that work today in the form of art, bridges, and roads.

Therein lies the real key to the current economic dilemma: jobs. There have to be jobs so people can collect a paycheck which allows them to spend. And the jobs need to be somewhat secure so that buying a house or a car that requires payments is psychologically realistic. It's not just about having a job. It's about knowing the job will be there so that future commitments can be made.

Once the jobs are created, through public spending as well as through tax cuts for corporations which can then hire more people, more spending can occur. There's some questioning of the wisdom of giving corporate tax cuts, that a better way is to give taxpayers tax cuts of $500 or $1,000. That's a short term solution. That money is only a temporary boost for the individual. Better that corporations have continued tax relief to hire permanently. If there were a tax cut for companies, it could be tied directly to hiring. The more people a company hires, the higher the tax benefit.

What does all this have to do with investors? Everything. American investors have always been risk takers, just as their ancestors were when they headed for these shores. Without risk takers, there would be no companies, no capital for growth. Investors still need to be willing to risk their investment dollars, only now they need to be cautiously risky. This is not the time to bet on an idea with lots of sizzle. Now investors need to focus on stocks that are more than surviving. They're thriving in a difficult time. When the economy recovers, they most likely will do even better.

And diversification is still needed. Buying gold or real estate is probably a good idea, especially if inflation comes roaring back after all the government expenditures are in the system. But keep them as part of a full investment portfolio. Stocks and bonds are important for any successful investment strategy, even if stocks were pounded this year.

This past year was rough, but like one robin doesn't make a spring, one bad year doesn't make forever. Look back at history, both economic and political, especially in the United States. We're a nation that goes to extremes, pulls back and then rallies ever higher. And I have every faith we will again. Hey, this is America.

Tags: Comfort Zone Investing, ComfortZoneInvesting, featured, New Years, NewYears, Ted Allrich, TedAllrich

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Reader Comments (Page 2 of 2)

1-05-2009 @ 12:50PM

Richard D. Covini said...

You make some good points, especially about the need for the average wage earner to be confident that he or she will be able to earn a dollar today, tomorrow, the next day and the day after that. Then he or she will spend and the economy will thrive.
As for immigrants, you said, "Initially they came from England." Excluding the Indians and the Vikings, didn't the immigrants initially come from Spain?
For most of the early immigrants who came here by choice, wasn't the motive economics rather than freedom?
.

.

1-05-2009 @ 2:32AM

Buster said...

jmjmosley,

Don't you just love it when the new third world immigrants come in- legally or not- and claim equal credit with our ancestors for building the USA ?
Don't you love it even more when the politicians agree with this lie to get their votes?
And if you don't agree, it makes you a racist?

1-05-2009 @ 6:12AM

Robert Long said...

Do not fret, Mr. Obama has a plan .

1-05-2009 @ 6:38AM

Johnny said...

I see no end to our current crisis. Govt spending to create temporary jobs is a form of welfare. For temporary welfare to work, there has to be an increase in productivity in the future caused by demands for products being produced.

Companies are being closed by the thousands and the jobs created overseas, not here in the US. It is hard for a company in the US or any of the developed countries, to produce a product and be competetive when the yearly wage overseas is 600 dollars per year. Until something is done about this, we will continue to lose jobs. How then are we going to pay for this huge deficit we are creating.

We have sold our souls to Communist China. We depend on them to finance our government and supply all of our products which means we can spend trillions of deficit dollars to temporairly boost the economy but we are creating no new permanent jobs which leads to needing more and more temporary bandages. It is a never ending cycle.

In the end, manufacturing and production has to return to our country. The only way I can see this happening is for us to refuse to buy products not made in the USA. Go into any Walmart store. Empty the shelves and there won't be 5 products left made here. All of this means we are shipping dollars to companies overseas and paying workers overseas, not here in the US.

You can't have a standard of living without producing. We are not producing, we are consuming. What happens when the money runs out? You can only wave the flag and say we are the greatest for so long and then it changes to " We used to be the greatest!"

I am not smart enough to figure out the solution and I am 100 percent convinced our elected officials aren't either. I hope someone comes forward who is capable of it for the benefit of our children and grandchildren.

1-05-2009 @ 3:09PM

PB said...

It is time to rethink what our government is about. First, this country was founded as a republic not a democracy! Nowhere in the D of I or Constitution does the word democracy appear! Our government no longer serves we the people! It is time to overhaul the executive and legislative branches. Time to look at how our founding fathers decided what form of government to establish. I believe you will see that over time the system was corrupted to serve the few rich with them throwing the people a bone now and again to keep us "happy". Democracy is only different from communism in that we have the right to complain! Democracy is the next step to socialism which then leads to dictatership!

1-05-2009 @ 9:00AM

pete carr said...

try doing GOD'S will. hear the preaching of the Gospell,from people who have received the Holy Spirit.because the great tribulation is about to begin! read Saint malachy's 830/odd year old Prophecy that the Catholic church has kept all these years!

1-05-2009 @ 9:18AM

Coral said...

As a small business owner of specialized equestrian apparel products I cannot stress the importance of not outsourcing enough. I may make a great deal less than my competitors who outsource to China, Peru and Mexico but I also make sure that ALL my seamstresses are Americans and make sure as many of my raw materials as possible are produced here in the USA. The key to any change in this economy will be in the choices of companies NOT to outsource. The increased costs to pay US workers will much more quickly find its way back into the economic stream than the gains you personally might make by sending jobs overseas.

1-05-2009 @ 9:36AM

Wily said...

Wall street economists always say, "history tells us." As if wall street had been around a thousand years. Pretty funny. Where would wall street be if truckloads of 401k money were not coming in regularly from the heartland? Must have broken their hearts when they couldn't get ahold of social security money. Damn thieves.

1-05-2009 @ 11:42AM

Ray said...

To all you naysayers: Where do you get your knowledge of what is going to happen? None of you have any credibility regarding the economic future of our country or the world in general. Your dark persona and subjective opinion merely fuels negativity. Just shut up !!

1-05-2009 @ 5:01PM

JMA said...

Please be aware...
"We" didn't vote an "African-American" into the Presidency...
Some people voted for an ignorant, non-accomplished, tax-and-spend Socialistic & Pro-Muslim crooked member of the Chicago Political Machine who just happens to be a Racist Mulatto...
The rest of us didn't and we see him and his proposed policies as being detrimental/destructive to Democracy and American Capitalism...

Sorry...but I (and a lot of other working, taxpaying Americans) just don't have much of a positive outlook on what the next four years will bring...ESPECIALLY with a totally Democratic controlled Presidency and Congress and the Unproven Obama and his crooked Cabinet of Chicago Thugs and Crooks, Re-cycled Clintonists, and DC Political Insiders who have no interest in any kind of "change"....

Say SAYONARA to the good times...It's going to be a rough and rocky road ahead....