Summertime....and the livin' ain't easy. The economy's in worse shape than the administration thought, even after pumping hundreds of billions of dollars into it. More people are losing their jobs. Unemployment's at 8.5% and according to many economists will go higher, maybe above 10% before the layoffs stop. Gas at the pump has gone above $3 again, even with the price of oil starting to show some weakness. Home prices are still going down and foreclosures continue to rise. Defaults on consumer credit is at all-time highs. When will it ever end? Don't know. No one does. But that isn't a reason to stop investing, to quit preparing your portfolio for the next big upward move that will surely come. You doubt that? Just look at a price chart for the Dow Jones Industrial Average over the last 100 years. It's full of periods where the line is going down, only to be followed by large increases on the upside. Unless the whole capitalist system is gone forever, history will repeat. There will be an upward swing to this market, and it's more likely sooner rather than later.
The stock market doesn't give away money. If it were that easy, we'd all follow the crowd. Remember, the crowd doesn't make money on Wall Street. The contrarians do, the investors with the intelligence to move before the rest of the world does. Think of George Soros or Warren Buffett.
Buffett has been an advocate of buying certain stocks in this market for months. Some of them he bought at much higher prices (see General Electric (NYSE: GE) as an example), but he's positioned his portfolio for the future, not for the current mess. The prevailing gloom is already priced into GE. There's no hope left in the stock price. But when the general economy starts to improve, GE will have moved well above its current levels because stocks discount the future by six to nine months.
As with all smart investors, Buffett doesn't own just GE. He's got a wide range of investments. He's diversified his risk. He's even sitting on a lot of cash because he knows the lights aren't all green, that there's lots of problems left to solve. But that hasn't taken him out of the market. He's just more cautious.You can do well to follow his example. Look for stocks that have solid earnings, even in these rough times.
An example: Lancaster Colony Corp. (NASDAQ: LANC), a specialty food maker and candle manufacturer. (Written up at The Online Investor) It's increased the dividend every year for the last 46 years and odds are good it's going up again this year. Coca-Cola (NYSE: KO) comes to mind as well. And IBM (NYSE: IBM). These are all solid stocks with good, growing earnings that would make a strong basis for any portfolio, once the economy recovers.
The depressed investors won't agree. They lost so much money in 2008 that they've given up, sold their stocks, and are hoping interest rates for deposits go higher because they're sitting on cash, waiting for the real recovery to show itself before they invest. It's a human reaction, flight to safety. But smart investors will only go so far with that thinking. They know this is a temporary state of affairs, that there are good stocks at great prices, that a prolonged growth period will once again be part of the economic cycle. They're the ones buying while many others are selling. But they're tempering their enthusiasm. Only a fool would not be diversified or fully invested at this point.
Ted Allrich is the founder of The Online Investor, founder of Allrich Investment Management, LLC, as well as the 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.











Reader Comments (Page 1 of 1)
7-11-2009 @ 12:19PM
Lee said...
Only a fool shall buy paper that is worth about six to one.
In other words, paper from the stocks are secured using my money: example: every six dollars I place into stock is secure with just one dollar of the stocks I chose.
Most people I know say that is worse then going to a table in Vegas and placing down a bet. I want to invest into more then paper. ( which you can use just as toilet paper ) The U.S. Money is going down more and more in value. So what can one buy and be safe ????
How about going into investing into yourself? Buy a business? Buy 20 dollar gold coins? Silver Coins? Buy another home 40% below the current value?
I agree, people should invest in something. But NOT paper!!!!!
7-11-2009 @ 1:03PM
john said...
This country has entered the point of no return. The only way it has a chance to come back is if we start all over. We have to get rid of the GREEDY. The ones that caused this mess, failing businesses and a new Washington. This country also has to get it morals back and strong family structure. Otherwise, sitting around waiting for the economy to come back is like pissing in the wind. The U.S. is broke. We're being set up for a new world order. The Gov. wants to distress this nation so they can declare martial law. That will give them control over everything. You can bet the U.N. is involved in this also. It seems that the Pope also wants a world order, "there is urgent need of a true world political authority". Obama seems to be way to relaxed. He sure doesn't seem to to concerned about us. All these trips to these world leaders, who knows what else they're talking about. Decreasing the population also comes with a NWO. Take a look at these videos.
http://New-World-Order.itrustgodonly.com -
http://death-camps.itrustgodonly.com/The-Obama-Deception/
7-11-2009 @ 3:17PM
paul s said...
GE is double its 52 week low. If it bottoms again near that, it would be worth it. If you bought around that low in March and sold on the bounce, GE is a great investment. If not, it will return to where it was or close to it, shortly. If you are young, it might be worth it. If like me, you are in your fifties, now is the time to be mercenary, no more holding. Buy on dips sell on bounces. There are investment opportunities besides stocks and bonds,such as vacation rental properties, that will produce an income stream that you, as an investor, would have more control over and over time will produce good returns. Mutual funds and 401k vehicles will be exposed for the shams they are, great ways for you to sever control of, and then loss of, money you already earned. And yes, interest rates will rise. Bet what's left of your 401K on it.
7-11-2009 @ 9:55PM
Gary said...
Stocks are for the Sheeple. Gold ,the forex, and bonds are what they invest in.
7-11-2009 @ 6:45PM
jack said...
trust me... i retired at 54, live in hawaii with pocket change for a mortgage on a million dollar home on the golf course..... this is not the time to play with your money...
7-11-2009 @ 7:12PM
dan said...
This is what you get when our greatest export the last 30 years has been jobs to third world countries, like Communist China. And they call this free market capitalism. Only a fool knows that eventually China will control us economically, if they don't already do and the American public will revolt against corporate controlled government. There is only only one party, the party of the corporatists/globalists, and they don't Listen to you......They listen to their campaign contributions filling their war chests while they talk stupid talk and tell you they can't do anything about health care, oil, illegals.............
7-11-2009 @ 7:20PM
Jeff said...
Should we really take the advice of this "expert" stating that unemployment is at 8.5% when it is actually currently 9.5%? What happened to quality and proofreading?
7-11-2009 @ 9:57PM
jack said...
my neighbor, who chastized me because i didn't vote for the insignificant black dope... told me yesterday that he just lost his job.... he was hanging on by a shoe string to begin with... married & 3 little kids.... i laughed in his face... just how stupid do you have to be? i told him before he voted.... so who's laughing now?
7-12-2009 @ 12:03PM
cquiamb said...
WARNING, the stock brokers are at it again promising you riches, but not you, to themselves. As soon as many of you put in your hard earned money in the market, watch the stock nose dive, that is themselves taking your money!
The stock market is the biggest con game there is! If it is too good to be true stupid, then it is!
7-12-2009 @ 3:24PM
dan said...
A stock market does not make a GDP. And that is where the rub is. When US corporations are in China and they are doing well because of low wages and tax dodges, then they have no allegiance to the US. In effect they become communist sympathizers because the Chinese government tells them they can stay if they do not say anything bad about their treatment of the people of China or how they cheat at all the rules laid down by the World Trade Organization. Check out Google, Microsoft, Cisco, and IBM. They all play along and are as bad as the Nazi sympathizers before WWII, IBM, Ford and others......The list of your Communist sympathizers in the government and corporate America runs long because they all profit it from it. When the greatest export you have is your manufacturing sector, you become a nation of third worlders and about the only things you’re going to build are Big Macs and sit at home and sell Chinese crap on line.
7-12-2009 @ 3:41PM
Dan said...
Selling stock does not a GDP make? Cramer is a salesman for the person who stays at home and plays in the stock market, which is a zero sum game. It adds nothing to the economy but wealth for the players, wealthy hedge fund investors.
So why does Wall Street have so much power over our economy then? It's called you get what you pay for and if you contribute enough pesos to our government officials then you get to keep the game running. But this is not making America any better, it's making things worse because the other players, the too big to fail banks, are gaming the government too. They get what they want because they pay for it through campaign contributions, via K Street.
So where does that leave the working guy? You my friends are left to the wolves because you do not have any cash to play with the big boys. But what to do? You are going to have to go to the streets to be heard. And what to say? You are going to have to scream for public funded elections and shut down the K Street greed crew so that you may once again have a say in our democracy/Republic.
And while you're at it you might want to get rid of the WTO, which is the culprit sending your jobs to Communist China, a nation that is becoming an economic and military supper power that will never see the light of day as a democracy.
So it's time for some good old patriot duties to be performed, just as our forefathers did in kicking the economic royalists, British, out.
The economic royalists are in control of your future and you need to make some noise for your children’s future because that’s who is going to pay for it in higher taxes and lower wages.
7-12-2009 @ 4:42PM
cquiamb said...
Hey Dan,
Do you remember John Kerry fighting to prevent corporations from shipping jobs overseas when he ran for presidency? Who ended up getting hurt by electing Bush?
Republicans are pro business, that is their main core theory. Remember the child labor practices? that is the creation of corporations and it took the government to stop it. Corporations do not have their employees best interest at heart, it is MONEY that they care about, heck they can replace you with someone cheaper! If that means going out of the country that feeds them so be it.
I am tired of hearing how Obama has failed already and caused us to be in big debt. LISTEN UP, you Republicans caused this great depression that we are currently in, in 8 YEARS you caused the richest country in the world to fall on its knees. It will certainly take more than 6 mos. to fix the damage you have done.
7-12-2009 @ 5:08PM
cquiamb said...
For all those stock brokers, financial analyst, and planners, you all used to be a dime a dozen. You should have never been allowed to peddle to the public that they can retire millionaires by putting their money in their 401Ks and IRAs. Unless, you have a million dollars to put it in to begin with, you will never see it make a million!
7-12-2009 @ 5:28PM
debo said...
Times are hard so invest??? What kind of stupid idiotic moron came up with this headline. SAVE
7-13-2009 @ 1:48AM
FascismStinx said...
Anyone who still invests in this Ponzi scheme is either an idiot or part of the big Wall St. casino. Buy hard assets, ya twits.
7-13-2009 @ 1:50AM
Toogeorge said...
Check how far the Dow falls on Monday, if it follows Asian stocks.
7-13-2009 @ 6:08AM
ronandlane said...
I have lost ALL OF MY FAITH in any risky investments / stock market. Just look at the faithless / greedy young people in the market who have no values whatsoever. They are only concerned about one thing and that is how they can steal our money.
Wall Street is the most corrupt and dangerous place to invest a single dime of hard earned money and therefore I don't own any stocks at all PERIOD.
THe days of wine and roses are finito.
Capitalism stinks and is rotten to the core. Socialism is no better. I am not sure what works any longer because man is involved in all systems and man basically is rotten to the core.
7-15-2009 @ 10:39AM
Janice826 said...
I had 50 shares of AIG stocks, last week they did a 20 to 1 reverse split, i now only own 2 shares is this even legal?
how can they just take my shares away when the company is still in business? so all my profit is gone and I own a lousy 2 shares. Does this mean and company can just decide to deo a reverse split and decide how many shares they are going to give you?
Please someone help me to understand this type of stealing