Daily Posts Archive
To say that we live in historic times would be an understatement. We’ve all been shaken by more earth-shaking news in just the past few months than we’ve seen in the prior decade. There’s been the takeover of Fannie Mae and Freddie Mac, the disappearance of Lehman Brothers, Bear Stearns, Washington Mutual and Wachovia, the TARP rescue plan and now the potential bailout of the Detroit automakers. Oh, and did we mention hedge fund redemptions and failures, and now commercial real estate problems?!? And the market, of course, has reacted.
I don’t mind telling you that these are scary and depressing times for investors. One wave of bad news no sooner breaks over us than another one--even bigger--appears. The American banking and auto industries are circling the drain, and the Dow, which was within spitting distance of 14,000 just a year ago is now, having cracked the 8,000 level, trying to decide whether to rest there for a while or just plunge further. All in all, it’s enough to make you turn off your TV, limit your newspaper reading to the sports and funnies and abandon your computer for your game console. At least in World of Warcraft, you know the rules.
For the year so far, Cabot Green Investor subscribers have enjoyed some big winning picks, like American Superconductor (AMSC), a wind company that gave us a 40% profit on in just six weeks this summer. There is no denying that with the market crash of October we’re down, but just in the single-digits as of early November. I know that’s a lot like a pitcher bragging about an eight-inning complete game, but we’re proud of how our adherence to a proven formula has put us far ahead of the competition. The simple fact is, the more you conserve now, the more you have for later. That’s true both in your winter energy bill, and your investment portfolio.
After years of buying gadgets, cars and whole wardrobes on credit, the gravy train has stopped. Not only has it stopped, it’s derailed and is hurtling off of a cliff. Many people have locked up their purses and wallets, cut up their credit cards and stopped spending money. American consumers are spent.
Many years ago, I was taught to believe that value investing, using fundamental analysis, is the best long-term approach when making investment decisions. In the years since, I learned some growth and momentum techniques as well. I never argue whether one approach is better than another. But I do believe in using more than one methodology when choosing stocks to diversify my portfolio. Thus my portfolio contains a mixture of growth stocks and value stocks.
Three months ago a reader wrote: “Timothy, I look forward to your writings everyday. You are definitely doing your part in the BATTLE TO SAVE AMERICA’S BRAINS!” I responded by saying I liked the phrase and might borrow it. But I’ve never found quite the right place to use it. It’s a bit grand. All I’m trying to do is communicate some intelligent thoughts, get you to think a little, and maybe subscribe to some of our investment advice.
Whether or not you agree with the outcome of Tuesday’s presidential election, there’s one pledge that President-elect Barack Obama made that will benefit all of us, as citizens and investors--his energy plan. For too long, we’ve had administration after administration that failed to recognize the energy problems we are facing now and will face in the future. Finally, we have a leader who is promising to reduce greenhouse gases, get the U.S. off its dependence on foreign oil and create Green jobs.
The economic news is probably going to get worse before it gets better, but it’s likely that the stock market won’t care. The stock market looks ahead and has probably already priced in most of the economic downtown. So be prepared for once-in-a-lifetime bad economic readings, but don’t expect the stock market to follow them down.
Markets don’t stay down forever, and this historic selloff has created a whole raft of bargain stocks. There’s just one problem. How do you know when to get back into the market? Here’s an easy way to tell, one that’s based on one of Cabot’s powerful set of market timing indicators, the Cabot Tides.
Our financial system lies in shambles, and the dominoes continue to fall, bringing down companies and stocks in one sector after another. Consumer confidence is absolutely terrible. Friends who previously asked about my market opinion simply as a common courtesy now ask because they’re genuinely worried about their own retirement funds ... and about the future of America. And what do I tell them? “This too shall pass.”