Posted on 07/04/2010 7:06:30 PM PDT by blam
Investing Strategies For The Next 'Lost Decade'
Kevin Parker
July 02, 2010
We've locked in a "lost decade" in the first decade of this century - essentially a decade with flat or negative returns in the broad market. I'm of the opinion that we will have yet another lost decade (note that Japan has consecutive "lost decades"). Without going into detail, I believe a number of factors will force us into a lost decade including a de-leveraging economy, high government debt levels and a shift in American attitudes towards saving and spending.
So, how do we invest in a time period where we anticipate another lost decade? At this point, I wish to explain that even if you disagree with me on the macro-backdrop in which we're investing, the following insight might still be beneficial as you map our your investing strategy.
What Wall Street Wants You to Do
Many will be tempted to simply move forward on schedule, investing a little bit each month in diversified mutual funds and broad market indexes. This is one approach you can take, but it's not my favorite approach. Wall St. prefers this approach because it ensures maximum dollars invested at all times which generates more and more fees for them.
While this isn't my approach on an overall strategy, it is my approach with my DRIP stocks (DRIP = Dividend Reinvestment Plans). My DRIP stocks right now are only McDonalds (MCD) and Wal-Mart (WMT). These positions are ones that I'm committed to building on a regular basis no matter what the market is doing. (For more information on why I like each of these stocks, click here.)
A Conservative Approach
If we're anticipating a true "lost decade" where we either lose money or earn no return on our money for a time span of ten years, then obviously, a conservative approach is recommended. In such approach, I believe we should exercise extreme patience and wait patiently for entry points in sectors and stocks that are somewhat resistant to a low growth economy. In addition to the DRIP names I mentioned above, other defensive areas might be consumer staples such as Philip Morris Int'l (PM) and healthcare such as Pfizer, Inc. (PFE).
While I've offered some potential areas to invest in a weak economy, I don't recommend allocating all your money immediately to these areas. As I said, extreme patience is my recommended approach. If that means sitting in high levels of cash for a prolonged period of time, I find that acceptable since capital preservation is our number one goal.
If you haven't noticed, significant drops in the stock market have become a fairly common occurrence in the last decade. If we believe this trend is to continue, we can expect a time in the next few years where stock prices will drop significantly. I wish to position myself accordingly to maximize this as an opportunity, not a crisis. By waiting for such a moment, we can buy quality companies and very low entry points. This serves two purposes: a great point for capital appreciation and a higher dividend yield based on a depressed stock price. If no crash comes, I'm content with cash and other dividend positions. If the last few years are any indication, I think another crash (or maybe just a drop) is definitely likely.
Focus on Income
If and when these entry points arrive, we will pile our cash into high yielding names that have a history of continuous dividend increases and a history of consistent earnings. The focus on income will provide us with fantastic cash flow in a period of little to no growth.
In summary, my strategy over the next decade is as follows:
1. Cash - Having a significant part of my portfolio in cash ready for deployment in a very attractive investment opportunity
2. Patience - Waiting for a significant pullback in the market - I'm willing to risk losing a quick short move higher for the opportunity of truly attractive entry points
3. Dividends - When we do pull the trigger, it will be quality dividend companies with increasing dividends
If that means sitting in high levels of cash for a prolonged period of time, I find that acceptable since capital preservation is our number one goal.
I thought of this:
Uber Bull Barton Biggs Throws In The Towel, Slashes Stock Holdings
“I’m not putting my money into anything. I’m raising cash.”
"His advice: individual investors should move completely out of the market and hold cash and cash equivalents, like Treasury bills, for years to come.
Bump
2. Repeat Step 1.
The best return on an investor’s money for the next ten years will be to pay off their debts.
If I had money to invest I’d be investing in auto repair businesses, towing companies, air conditioning repair companies or maybe plumbing companies.
Good ones...also, bicycle shops.
I've forecasted the return of the mom & pop corner grocery when gasoline prices skyrocket. I'll ride my bicycle (I live in a rural area) to the corner grocery. (In the daytime with my pocket pistol, lol)
The best market strategy is to pull out so long as the usurping marxist is in the Oval Office and marxists control Congress.
Lost Decade bump for later...........
When fuel prices surge it will almost as if distances increase. There are certain parts of town I wouldn't mind being more distant.
The adjustment will probably be very rough.
It won’t be a lost decade. It’s gonna be a lost half decade. That’s my most recent prognosis. Wait another two years then buy stocks like there’s no tomorrow. You will be rich beyond belief. This is my plan as of today.
Have you considered what will happen if our DC Masters decided to “monetize” the debt and our money becomes increasingly worthless?
What then, genius?
Starting one this winter..part time,, LLC.. While I work full time as a technician for the USPS..any women want to join me? PS,, I'm 53, single,,no kids,, employed.........
If that means sitting in high levels of cash for a prolonged period of time, I find that acceptable since capital preservation is our number one goal. <<
I was so stupid!..Ive been investing my small levels of cash over a prolonged period of time in Gold...
And the problem is???
Stay away from plumbing. they are heavily unionized...in big cities at least.
And, in this discussion, when I'm speaking of "investing" I mean not being one-of-man investors, but actually having a major stake in the company. Maybe even running it from day-to-day.
It's really GPS technology that has made tow companies interesting, as that basically eliminates the potential of drivers to make cash deals on the side.
Oh...and one other potential growth business is the storage space business. When people can’t afford to add that extra room to their home or buy a new, larger home, then the demand for storage must increase.
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