THE BRAVE NEW WORLD

May 2009 Newsletter from Joseph W. Harowski, CFP

Cycles come and cycles go, that is the nature of investing.  We have been living through a seventy, eighty or  hundred year selloff, depending on your timeline, and it has been extremely painful as anyone invested in just about anything knows.  Whether we are through it now or another leg of the downturn is about to slam us is a debate currently playing out in the markets.  What we do know for sure, is that we are in unchartered territory when it comes to government deficits.  The numbers are staggering.  If the US government spent one billion  dollars in deficit spending a year since the birth of Christ, they would not have come close to reaching the  number of dollars the Obama administration has authorized to spend to stimulate this economy.  This is the brave new world of government policy and control and what it means for investors will be spelled out over the coming decade.  As I have mentioned in the past, this is not the time to stick your head in the sand as an investor.  We will be seeing things develop in the economy that possibly no one has seen before nor can accurately predict.  What this means for stock market investors is to be sure your dollars allocated to equities are truly for the long term as volatility will prevail for a few more years.  Nothing can change until housing stabilizes (people can’t spend home equity they don’t have) and this too is probably still a few years away.   The recovery for the ‘lost decade’ in equities may possibly end up being another decade away.

The trap for investors is being set by the media through the multitude of advertising put forth by the brokerage and insurance companies pushing and pulling investors towards their products as the changes in the economy unfold.  Active management will be sold as the only way to navigate this storm and garner profits.  Trading the ups and downs of the market will be touted as the only way to get ahead and long term investors will be told long term investing is dead.  Watch any recent entertaining ‘Mad Money’ telecast with Jim Cramer on CNBC as an illustration of the media steering investors away from their long term goals in the hopes of short term profits.

To all of this I say, “don’t be fooled!”  Markets cycle up and down and sales organizations are always there to ‘help’ you through it offering their products as the answer.  What they are really after are the commissions and fees wrapped into their product ‘solutions’.  Long term investing is not dead.  This is simply the cycle we are living through having been born when we were.  Getting whipsawed in and out of the markets will not get you ahead,  it will only generate a boatload of unnecessary costs.

Smart Choice is focused on the only important goals,  your goals.  Let’s try and ignore Wall Street’s marketing machine.  Smart Choice will keep your investing costs low and help keep you in  position to benefit when a turnaround comes.  Remember, the vast majority of the time markets tend to coast  going neither up or down in any meaningful way.  Unusual highs and lows of any asset class come around sparingly and these are the times Wall Street looks to take advantage of you.  Right now they are preying on fear as investor’s emotions are running hot.  Have you seen any full page ads to invest in gold or to buy your old gold jewelry recently?