Here’s the past year in the S&P500.
Will it repeat the pattern of September and bounce back? Or will it continue going lower?
Let’s be positive and say it’s done going lower. Reasons:
1. Much less pressure from shares bought on margin that now must be sold. That contrasts with previous downturns where massive margin selling exasperated the decline.
2. There’s oodles of money on the sidelines. Think of all those muni bond holders who got cashed out in recent years. I’m one of them.
3. There’s not many other places to invest your money. Bank CDs? Safe corporate bonds? Gold? Silver? Iron ore? .Oil? Platinum? Real estate makes sense — in some places. But prices have risen dramatically.
What can you do?
1. Pray. Praying is not an investment “strategy.” But praying also means waiting. And that can bring rewards. When God closes a door, She always opens a window. My tenant moved out at the end of December. This morning the neighbor asked if she could rent the place. I haven’t even painted and fixed it up. That was my next “project.”
2. Examine your remaining stocks. Do they still make sense? Distinguish between broken stocks and broken companies. Coal companies are broken companies. Many in the oil patch also are.
3. Stay in cash. Cash is holding its value, given our lack of inflation — and serendipitously, the rise of the dollar. My yankee dollar has risen 30% against the Australian dollar.. It’s done well against the Russion Ruble, the Chinese Yuan, the Brazilian Real, etc.
4. Let our inviolate Stop Loss Rule continue to play out.
5. Put in some limit buy orders on your favorite stocks — but at much, much lower prices. You might get lucky and snag a bargain on the next dip.
6. Finally, don’t listen to any of your “friends.” Correction, listen, but don’t act. Some of my friends are really successful — in their own businesses. They do well at making doors, locks or chairs. They do well when the market is rising — like you and me. But they don’t do well when it’s falling.
7. Concentrate on your own business. Go visit the kids. Go dote the grandkids. Go on vacation. Overseas is cheap. Play golf or tennis. No reason to suffer the pleasure of watching something you can’t control — the ticker.
Classic example (but not the only one) of where our inviolate Stop Loss rule protected us. Here’s the last year of GoPro:
Startups.Yucho.
Say “NO.”
Most fail.
End of story.
Do not even think about investing in a company whose “deck” impressed you. Desk is short for collection of PowerPoint slides.
Getting the WiFi password
While he was visiting, my father asked for the password to our Wi-Fi.
“It’s taped under the modem,” I told him.
After three failed attempts to log on, he asked, “Am I spelling this right? T-A-P-E-D-U-N-D-E-R-T-H-E-M-O-D-E-M?”
Harry Newton, who’s happy. Daughter Claire stayed with us last night. We had a lovely family dinner. Just the three of us. We’re all just back from Christmas in Australia. This is Claire on Sydney Harbour just before the New Year’s Eve fireworks.
Jeez, you are an Australian ding-a-ling. Cash is the best investment? I figured the market would pop big today after I read that you wrote that. Nobody ever went broke betting against Harry. Put in buy orders at much, much lower prices. Why? So they will never be filled?
Harry,
I’m a little confused. You are always promoting the fact that owning your own business is the best investment, however you’re constantly saying that most startups fail. Is that not sending a mixed message? You could almost say; “i recommend you start a business but it will probably fail”.
Other people’s businesses fail. Yours doesn’t. That’s simplistic. But you get the message. And it’s been my experience.