Monday, September 26, 2011

A change in tune for older birds

Overall I am a pretty optimistic fellow, but… In today’s world of gray and black prognosticators it is hard to stay the course. The economic news is grim, oil prices and copper are trending down, consumer confidence is falling; there is a complete lack of political leadership. In the U.S. on the eve of the 2012 election, Democrats and Republicans keep on posturing rather than compromising on how to handle the fiscal environment; Europe is not much better. How come, financial experts keep on telling us that the European bail-out fund now at nearly 450 billion Euros is not sufficient and needs to be closer to 1 trillion when the entire Greek debt load is barely 200 billion? At the end of the tunnel there is fog not light!

We’re living in an oversupply of inaccurate information; we’re living in a vacuum of real information! There is no visibility! We hear more and more people forecasting doomsday and even the few optimists do not forecast a bull market for the coming year. Yes, over the long term things will work out and for young investors this is the time to look for value investments that will pay-off 3 to 5 years from now – don’t be in a hurry though. For older investors and retirees who need not only cash to buy stocks at very good prices but who also may need to live of their investment cash (flow), it may be time to sell off riskier stocks – not good dividend paying stocks though. Sell some winners and losers to stay capital gains (tax) neutral. This will give you maximum cash.

If there is another down leg to this bear market correction we will be in a position to take advantage of buying opportunities later on. On the otherhand, if the market keeps on hovering at these levels we, older investors, will at least be able to sleep through the night. This is not a panic reaction at the bottom of a bear market! This is a strategy for the mature investor, whose time horizon is short and whose 2008 scars are not yet healed. I guess, being an older bird, I have changed my tune.

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