The more I think about the government’s recent quantitative easing program, the more I like it.
What CEO would not want to take advantage of record low interest rates to borrow money that would generate increased growth and profit? Many of the world’s biggest companies, such as Microsoft, IBM and Coca-cola are doing just that. They don’t even need the cash as most already have literally billions in cash. They just see an opportunity. So why shouldn’t Uncle Sam? With an opportunity to borrow money practically for free and invest it into the economy makes sense.
Don’t get me wrong, I don’t like the idea of racking up enough debt to choke a horse and mortgaging our children’s future any more than you do. The idea that our deficits rival that of a banana republic makes me sick. However, what if it works? If they don’t try it we are certain to fall into a deflationary spiral and subsequent depression. Even though that would actually most likely be the best course for our nation, it is not the discussion here as it is simply not going to happen. The government is committed to the more immediate economic concerns and will continue to throw money at the situation. Therefore, nimble investors have a tremendous opportunity at hand in the short term.
You must be invested right now. Here’s the simplest way I can say this: The guys who are printing the money are telling you and me to buy stocks. They have said they will pour money into the economy as needed and most importantly Bernanke has said point blank that rising stock prices are a major goal, which he uttered on November 19th, “higher stock prices would boost the wealth and confidence of individuals and businesses”.
I know your gut is telling you how bad it is out there, but that doesn’t matter. You can’t just sit in the bank earning nothing. The facts are the facts.
- ”You don’t fight the Fed” – Low rates are here to stay
- ”You don’t fight the tape” – The trend is up and “the trend is your friend”
- Corporate earnings are strong and getting stronger. The rally won’t end until earnings start to decline
There is no use arguing whether it’s right or wrong. Low rates, a steep yield curve and accommodative fed are going to feed rising stock prices. The key is how to play it.
Here’s how to play it:
- Take a tactical investment approach – fight the ease and laziness to just sit idle in a buy-and-hold (buy-and-hope) investment portfolio. Buy-and-hold simply fails investors during secular bear markets, and this time it has been no different. A tactical active allocation works during both secular bull and bear markets and can smooth the ride, participating in the bull markets and protecting hard earned gains during the inevitable declines while producing rewarding gains with less risk.
- Have a personal exit strategy. Investors need to understand that we are in the midst of another bubble, and you have to know how to properly Play with Bubbles. Bubbles create incredible opportunities but they carry tremendous risks as they always burst. When the bubble bursts, it’s going to be UGLY. We called it right the last time in my Economic Tsunami report, and I intend to call it right again.
- Focus on Dividends and income investments, even if you are a growth investor. We can still find yields of 8+%, and our client total returns have been spectacular. That’s where the sweet spot is right now in the market. Low interest rates make them even more attractive High yielding investments still appreciate when the market rises but they give you more protection during declines and they generate positive returns during a flat market. There’s a reason dividends account for almost half of the stock markets return since 1925 and 100% of the returns for the last decade.
- Optimize your portfolio. Be sure you are getting the very best returns with the least risk possible. Most people take on more risk than they need, want or even think that they have , so,,, , so get a free 2nd opinion so get a free 2nd opinionso get a free 2nd opinion.
- Our TDT™ Protected Dividend Strategy is tailor made for this very market.
- Be the expert or hire one.
That’s where we can help. Our active hands-on approach to managing portfolios can help you manage risk and deliver returns. If you would like to discuss the market, economy or simply get a free second opinion on your portfolio, call me for a free consultation today at (916) 925-8900.
P.S. If you know someone that would enjoy these newsletters or who could benefit from our services, I would very much welcome the introduction.