Investment Strategy

August 18th, 2011 | Author: | Finance & Investing

The days are interesting, boy oh boy, they’re interesting. The market is up, then the market is down, then it’s up, and then down lower. Then…well you have the idea.

Our strategy when it comes to investment turbulence is pretty simple:
1. We want your investment portfolio prepared in advance for whatever happens. We will never be absolutely correct about everything in every respect. But the simple fact is, we don’t have to be, to have great success. What we must do is be approximately right instead of absolutely wrong.

2. We want to have built trust with you before trouble hits so that you know during trouble we are working diligently to anticipate and respond properly.

Because together we have developed this relationship of substance that works well for all concerned, we have received two calls in the last month about investment “worries”. I recently saw a blog piece from an advisor who says: “I’ve had many calls from people understandably worried about the current market situation.” He indicated further the following four questions are what worried investors are asking him. Here are those questions and the answers I would give…

Can it get much worse?

It can. Will it get much worse is a very different question. Why is it bad and what should we do about it is the ultimate question. The reasons things are bad are 1) the Obama Administration has done most everything possible to prevent growth in the struggling economy he inherited, making bad worse, and 2) one way or another the European Union is about to come apart.

In the next 15 months, economically, things will get worse. Europe’s issues will truly hit the fan, and the dwindling US economy will bring about a change in government.
Should I sell my stocks?

Given the fact the entire portfolio we manage is about 65% in cash right now this is a question I fortunately don’t have to answer. For others who have stocks, selling depends on what you own. More importantly than selling though, is the issue of who has the responsibility for preparing your portfolio for times such as these? If you are responsible, then you need outside investment help. If someone else is responsible, you need to get someone new to provide investment services.
Is there anything safe out there?
Yes. But, here again, the answer to this question is conditional. Are you talking about making new investments today or about holding onto what you already have? Today we are making no new investments. Today we are holding onto what we already own, a small number of quality companies (whose businesses are performing just fine), a couple income producing REITS, and a ton of cash. But I wouldn’t buy today what we already own because there is still turbulence ahead of us.

Where should I invest during these times?

Anywhere you find assets where the stock/purchase price is less than the value of the business. We believe there are a number of those situations available, but we’re also pretty confident the aforementioned turbulence still looms. There will come a time when the market trouble rages, but it becomes apparent the waters will calm substantially. Until that time arrives, we are researching/analyzing potential investments, observing and evaluating the conditions on the ground, and keeping our powder dry. The money is made when the apparent pressure is the greatest…said another old school way: It’s always darkest before the dawn.

 



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