EighTT

Disclaimer: The opinions expressed here are solely my own. No part of the following should be construed as a solicitation, offer to buy or sell securities, or recommendation of any security.


Hi Brad.... I am thinking about you. I know how hard people can be on you when the market is not doing well. I thought it might be a speck of comfort for you to know that I know that we have done our best. Consider how I would feel now if I had questions in my mind about my advisor. You are conscientious, intelligent and so dedicated. I know that I am where I am supposed to be.

Here is an unsolicited "Life Lesson" for you. I have had times when there was no money and no prospect to get any. But when I look back on those times now, I do not remember any stress or unhappiness. In fact, I remember those times as very happy. That is because my hope is not in anything but the Lord. Then and now.

Your client and friend, B

My reply:

Hi B,

Thank you for the kind words. I am actually quite optimistic. I believe we are approaching a low, which should coincide with the previous lows reached in 1997. I feel very strongly that this is a good buying opportunity and I have been, when possible, putting my money where my mouth is. My last several purchases include Pfizer, Home Depot and General Electric at prices that I didn't think I'd ever see again.

The problem here is that the public is not buying, and in many cases, they are selling. They think they will be so deft as to be able to get out before things go down any more, then get back in such a way so as to experience the next leg up. It won't happen. What will happen is they will lock in losses by selling at 5-year lows. This causes paper losses to become very real.

Then, they won't add new money as they should. Remember that if a stock goes down 50%, and you buy it at the lower level, you've made 100% once it returns to former levels (assuming, of course, that it does). Unfortunately, the public will stay "on the sidelines" until the market rallies substantially. Then they'll get back in, fearing that the train is leaving the station without them and things are now somehow "less uncertain". The problem is that much of the recovery in prices will have already occurred by the time they get back in.

They will have realized most/all of the downside and turned paper losses into real losses, missed the opportunity to buy at low prices, and missed much of the ultimate recovery. Sure, there will be some crumbs left, but the smart money will have already been made. I can see it coming, but unfortunately I can't do much about it. It's those damn emotions that wreak havoc upon so many "investors".

Of course, they're also making the same mistake which got many "investors" in trouble in the first place, and that's chasing performance. Those same individuals who got burned by chasing tech stocks are now chasing bonds, real estate and gold because those sectors have performed well. It's likely their unfortunate destiny to lose once again by buying stocks high, selling stocks low, buying real estate, gold and such high again, eventually selling those purchases low, and concentrating their investments in highly appreciated sectors (i.e. failure to diversify). They'll later blame everyone but themselves.

Also, did you know that there is no rolling 10-year period ever where the market has had a negative rate of return? You can pick any starting date that you want to including before or during the depression, World War 2, etc. The average annual return for the S&P 500, looking at rolling 10-year periods since the mid-1920s, has been 12.9% per year! Clearly, we are far to caught up in the here and now; in the negative events and news of the day, and we are missing the big picture.

So business remains soft, but it's not that bad relative to others who I know. Because of the diversification I've employed for years, my clients are holding up relatively well and very, very few are leaving. Again, thanks for the encouraging words and loyalty and keep the faith! I have and I am currently very bullish (which is not to say that we're done, but I think we're close)!

Regards,

Brad

Merou

I just read this post (catching up with the weekend), and ironically I was thinking the same thing this morning when I heard on the radio that the DJIA is at 7800. "time to buy"... Now, or later? I'm tempted to wait another couple of weeks, what's your opinion? I have a lousy CD that expires in August, I'm thinking about using it on stock. Probably mostly blue-chip. Any quick advice you can give me? tia!

EighTT

I can't offer official advice, but I will say that I have been buying whenever I am able to do so. I've been buying quality blue-chip names, not technology.

Merou

in other words, now is a time to buy, because even if it goes even lower, it will go back up higher?

EighTT

However, I've been sure to diversify them and not chase crap which has been beaten down and deserves it!

Merou

ok - I understand :-). Thanks for the unofficial, unspecific, yet helpful advice. :-)