Daily Posts Archive

The healthcare column I wrote on Monday resulted in my heaviest email volume ever and I thank everyone who responded. In total, 69% of respondents were supportive, 6% were critical, and the remainder addressed other items in the column, mainly American International Group (AIG), which I used as an object lesson of stocks to avoid. But as several readers pointed out, I forgot one big thing, the need for tort reform! That alone is worth a whole column, and maybe I’ll do it someday. But today the words come from you. Here’s a sampling of the best.

The one big lesson I’ve learned since coming to Cabot is that not only can you time the market, it’s one of the biggest advantages you, the individual investor, has over the big boys. You can move into or out of the market at a moment’s notice! And if you still have money in growth stocks, and you’re watching the market take away a little more every week, you need to consider trying it. Soon.

Our healthcare system is broken. Insurance costs have risen inexorably. Doctors are frustrated at being paid less than they are worth. Millions of Americans are unable to afford basic insurance. And Americans are in terrible health. Yet previous attempts to fix the system have failed. So President Barack Obama is hunting for a less expensive system that will keep more of us healthy. I say, “Good luck,” sincerely but skeptically, because while I truly desire a better system I believe the institutionalized powers will make achieving change very difficult. In fact, I think what we need for this challenge is not a president but a dictator.

Today we’re featuring a special discount exclusive to Cabot Wealth Advisory readers from our friends at the Value Investing Congress. We’re also including Cabot Benjamin Graham Value Letter Editor J. Royden Ward’s notes from last fall’s fourth annual New York Value Investing Congress to give you a sense of the caliber of the program.

Get familiar with charts (there are many free charting programs online) and take five minutes to look at some of the major indexes every day or two. On the chart, you want to plot the index itself (say, the S&P 500), and you also want to plot its 50-day moving average. If most indexes are above their 50-day line, you should be constructive toward stocks. If most are below, you should be defensive. It sounds simple ... and it is.

Don’t be tempted to hang onto a stock for old times’ sake. Find new stocks to buy.

I frequently get mail from business brokers who want to help me sell my business, and I always throw it away. I consider Cabot to be a family business; we’ve been serving individual investors for 38 years and I expect we’ll keep on doing so for decades to come. But I recently took a phone call from a salesman who invited me to an all-day seminar. I told him that my business was not for sale, but that I might be able to write about the topic for my readers. He said that was fine with him; he’d still like me to come. So I went to the seminar last week, and here’s what I learned.

Two weeks ago, many of you kindly filled out a survey and, in doing so, asked several great investing questions, some of which I’m going to tackle today. I’ll touch on low-risk investment strategies for market downturns, high-yield investments, investments that will benefit from the economic stimulus package and the Green sector.

The investment principles taught by Graham at Columbia University became legend in the field of professional stock analysis.

Many value investors adhere to the old buy-and-hold forever theory. The past year, though, has been a brutal time to be a buy-and-hold investor. According to Morningstar, 95% of all mutual fund managers lost more than 27% last year. Holy cow! The S&P 500 Index (before dividends) dropped 21.85% for the 10 years ended December 31, 2008. The buy and hold strategy that many value investing gurus recommend has clearly not worked well during the past 10 years. Jeff Macke on CNBC’s Fast Money went so far as to proclaim “2008 will go down as the year buy-and-hold came to die.” Oh no, what do we value investors do now?