Calm Advice during the Storm
October 12, 2008 – 11:04 am
Surviving the waterfall
On this soggy day, I decided to take the opportunity to sleep in and get some much needed rest. Personally I wish the markets would do the same. I don’t know about you but I’m getting a little tired of “financial experts” screaming at each other on television in an effort to aggressively make their point. All the screaming in the world only accomplishes three things: it makes people angrier or it turns people off completely. It also creates a desire for short term fixes that may cause long term rebounding failures. Many of my friends and clients are tuning out completely, trying not to look as things get worse and worse. Although I worry about that response, I also understand it. How much bad news can you handle at one time?
My preference: calm, understandable explanations about the market and how to hold onto what you have. Think about the current financial crisis as a burning building – any normal person would take only what they could carry and get to safety. The government’s response: keep throwing solutions into the burning building. If you’ve noticed, whatever actions they take, they continue to need more to correct it, like a domino effect. Rather than let weak funds fail and then clean up the aftermath, they continue to try to save a weak building.
Why? Because they think constituents want solutions rather than truth. Not me. My motto has always been: tell me the truth even if it hurts.
Several months ago, I found a great investment advice vehicle that has helped me not only understand what’s going on but also helped me prepare for the downfall of asset value. In a nutshell they advised “pay down your debt and move your money to cash or cash-equivalents.” Unlike Suzy Ormann who advises to hold tight and buy more if you can afford to wait 20 years for retirement, they advise to secure your holdings so that you have something to reinvest when the dust settles. (Note: I like Suzy Ormann but right now I disagree with her recommendations for stock funds unless you’re in your twenties.)
Weiss and Larson are saying “Now is the time to think about the return of your money instead of the return on your money.”
401-k Advice: Keep your money in your 401-k but move from stocks to more secure vehicles. Their advice:
- 1. Treasury only money markets.
- 2. Government only money markets that have mostly short term treasury funds in the mix.
- 3. Money market funds with mostly short term treasuries in the mix.
If you have the time, I encourage you to listen to their Q&A session from Friday. It helped me get some rest in this volatile market. I hope it will do the same for you.
