wearmanyhats

Pretend for a moment that the Stock Market is on trial.  It is it done going down?

Look at the evidence that it may still go on down:  Unemployment is over 8%, a period of deflation has been in force, and the market has been dropping like a rock.  The big banks have tanked, the nation’s been in recession, precious metals have been climbing because of insecurity in the market, credit is tight, foreclosures are high, and businesses are failing.  Personal debt in this nation is super high, though it is going down.

Now let’s look at the evidence that it will go up:  We’ve had quite a few days of the market going up, some jumps, like today, have been big.  Home starts are up, credit is slowly loosening, and the Baltic Dry Index is going up.

Finding a bottom during a market like this is sometimes absolutely impossible.  Any long term investor can tell you that.  Investing when “there is blood in the streets” is the time to jump in, but when is the bloodiest? There is no telling until after the fact.

One thing that you need to look at is whether or not the recession is going to turn around.  That is tough to predict when layoffs are still occurring.  Sometimes you’ll just have to ride the market down a little lower in order to catch the train going back up.

This blog has been the source of recommendations for high dividend stocks that are now both value and dividend stocks.  They have fallen as other stocks have, but now are excellent values.  Many are bouncing back.  If you bought in a while back, ride with it.  Otherwise, revisit previous entries for ideas of good solid companies to buy into.  The one that I would say should be dropped is GE.  But others such as PG, FRO, BPT, NAT, ESEA, Coke, and JNJ are probably grabs at this date.  Not all of these are excellent dividend payers, but they are so cheap at this point that it’s worth  a grab.

If you are holding, your patience will begin to pay off soon.  Just take care of your personal debts, and you will survive any times of high inflation that may follow this time period.  Remember, just because some financial guru guesses that the end of the world is coming doesn’t mean it will happen.  And merely because they predict hyper inflation doesn’t mean it will happen.  It just is likely to.  There is historical precedence that this will occur.  But there has never been an administration that tackled a possible depression as quickly as this one has.

Something else to consider: there has never been this much money in the nation before. During the last major depression, so many people were poor before the bad times even happened.   Another consideration, there was a major drought on.  Farmers were losing their farms quickly.  Today, that isn’t a factor.  Any farmers that are going under have faced poor farm prices now for a long time.  Often it is the working wives that have brought home enough money to support the farm.  Anyone using their farm for a credit card will be killing their business, so that would fall under poor business management.

If there was ever a time to compare the plight of the American people, it would be to the 1970’s.  The recession that occurred then was one that has been very similar to this one.  But there is differences, too.  For one thing, the banks didn’t have nearly the same difficulty that they do now. Another thing, is that there hasn’t been as much consumer debt as there is today.  There were plenty of foreclosures, but the banks weren’t as saddled with high risk lending vehicles such as derivatives.

So you see, it is fairly difficult to predict what  will happen in the market now because there isn’t a clear historical precedence. It looks bad, that’s for sure, but that doesn’t mean that good old fashioned American frugality might not kick in and save the day.  One thing’s for sure, you don’t want to wait so long for the window of opportunity to close completely.

Trackback URI | Comments RSS