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The Week ending Jan 9, 2009 Recap: UGLY and NF. Review: The door is wide open for good stock pickers to crush the index. What to do: What America needs right now is a leader. What America does not need is more negative partisan dogma entrenching us once again on the road to purgatory-not to be confused with the road to provo at Snowbird. First off, nobody knows what 2009 will bring for the US economy. Secondly, as we have always stated, it does not matter because it can not be predicted. The economy, interest rates, and the overall direction of the stock market are as unpredictable as the weather. Everybody can understand that, right? As if we needed to provide yet another specific example on this topic. As if. Well, we are going to just because it is truly even shocking to me how totally wrong this guy got 2008. We are affectionately speaking of, PhD Jeremy Siegel, who regularly appears all over the media, is an Economics Professor at Wharton, obtained an undergraduate degree in Economics from Columbia, and a PhD from MIT. Could you be more educated? No. We are not picking on Jeremy Siegel the individual; we are picking on his agenda, theories, and predictions. Here were the predictions offered by Prof. Siegel posted Friday, December 14, 2007, 12:00 AM (just in case you would like to read the summary for yourself). Economic Growth-Predicted 1.5%-2.5% GDP growth in 2008, and that the economy would avoid a recession. This guy could not have been more wrong in every single area he offered a prediction. This should tell you something. It is not him. It is not his fault. It is just the way it is. In all the years I have been studying the markets I have yet to meet, read, or hear of anyone correctly, consistently, and accurately predicting the economy, interest rates, the stock market, or the weather! Because they are unpredictable they are irrelevant in an investment model. Next week we will give investors specifics on how to profit in the stock market without regard to the economy, interest rates, or the overall direction of the stock market-weather permitting of course - haha. Quote of the Week: "The greatest mistake you can make in life is to be continually fearing you will make a mistake." Elbert Hubbard
The Week ending Jan 16, 2009 Recap: More bank troubles derail the current market rally. Review: Apparently, everybody on Wall Street was drinking the Kool-Aid. What to do: Naturally, there is a built in unavoidable level of predicting when investing. For instance, we believe our recommended equities will outperform the S&P 500 Index. This, in essence, is a prediction. Our thesis is that long-term earnings of a company are directly correlated to the stock price. There are many investors who have made a lot of money using this theory. Contrast this with predictions of the economy, interest rates, and the stock market. The evidence is exactly the opposite; i.e. there are not that many investors who have profited from these predictions (of course, like everything, there are exceptions). For the mainstream individual investor these exceptions are virtually nil. Just like risk, the goal of predicting is to minimize it, not eliminate it. Here is a simplified (for the sake of this article) strategy for the individual investor. One) Allocate your assets between large cap stocks, mid cap stocks, small cap stocks, international stocks, equities, real estate, and cash/fixed income. Within each asset class buy only the best performers not second or third tier performers. Two) Diversify within these asset classes. It's o.k. to have one financial advisor as long as that advisor doesn't put all your eggs in Madoffs' basket. Three) Don't predict, invest. For the most part, besides minor adjustments and/or adding cash, once you get invested, stay invested. Lastly, don't drink the Kool-Aid! Quote of the Week: "The fool doth think he is wise, but the wise man knows himself to be a fool." William Shakespeare
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