I am not going to pretend that the stock market has been anybody’s friend this past quarter (with the possible exception of firms that collect fees on transactions).  And this past Thanksgiving week  has been the worst since the Great Depression.  It has been difficult under the current circumstances for investors to gain any confidence.  There is economic turmoil in Europe affecting the market.  And the failure of the so-called “supercommittee” to reach an agreement on reducing the Federal deficit cannot have helped either.

You may have thought, as I did, that the downturn earlier in the month was a buying opportunity.  Now I wish I had waited and still had more in cash to use on opportunities now, rather than seeing potential losses on my buys earlier in the month.  But, as you well know, it is impossible to get timing perfect.  A frustrating time!  But right now, these losses are “on paper” as I have not sold anything yet.

So what is there to do in such a time?  Right now, I am systematically evaluating my entire portfolio — looking at each stock, bond, mutual fund, certificate, etc. and trying to determine whether each remains a good investment for the long haul.   I will likely remain in those that are, and be rid of those that are not.  The one exception to this rule is that, depending on what is happening toward the end of December, I may elect to take a loss on some of my long term holdings, and then plan to buy them back sometime next year (once they are past the point where they would cause a wash sale).   I will do this if it will help reduce my current tax burden.

Another thing I am doing is looking for undervalued investments.  This is tough right now – it is hard to know what areas of the economy will thrive, and what areas are in the doldrums. I am spending much of my current effort trying to identify profitable companies that are selling below book value.

On the positive side, in spite of all the seemingly dark news, Black Friday (the retail variety) went well this year – sales were good.  So perhaps there is a glimmer of hope.  But, this begs the BIG question – our economy has become so dependent on consumer consumption, what happens if many of us try to move to a more sustainable economy?  What does that even look like?  I hope to spend some future entries on this topic, pondering what the new normal might look like in the future.  

In the meantime, what do you think?  Where do you think the economy is moving?  And, what would a sustainable economy look like, if such a thing is even possible?  Post your thoughts and join in this important conversation!

So it appears this morning (August 1), that there will be an agreement that will avoid default on the Federal debt, at least for the near-term.  Indications are that there will be a positive reaction in the markets.  As a result, I have been looking for bargains to take advantage of the surge – if only for the short term.

This means that I am focusing this week on a value-based approach.  Looking for those stocks with solid financials, but that have been taken down with the rest of the crowd in the general malaise that developed over the mud fight in Washington DC – cranky children generally behave better than our elected representatives and the President have been acting in the past month.

To be honest, I am having a hard time telling who is really on my side at this point.  Certainly, the Democrats still seem to be fighting to retain a tax and spend model – but even the President is beginning to wake up to the fact that this is not sustainable, although it is hard to determine what specific road he might want to take.  On the other side of the aisle, the Republicans are divided among themselves between moderate, pro-business conservatives and more radical elements that would sink the whole ship to prove a point.  I am reminded of why our nation’s founders deliberately set up the balance of powers in the first place – so that one group of demagogues couldn’t run roughshod over everyone – or to put it another way, to protect the minority from the majority.

As a business person myself, I have become confused as to who is working in my interest.  Certainly, many are claiming to be trying to protect small businesses – but the tax loopholes I see the Republicans protecting look more like big business breaks to me, and the Democrats?  Forget about it – they want me to “pay my fair share” and make it even less profitable to run a small business.  So why should I bother – at current tax rates, I might as well go work for somebody else, and tell my employees to do the same.

Whew!  I sure went off on a tangent there!

So, to get back to investing, I am looking for solid companies that are undervalued.  Some of the factors I look for include the growth rate of sales, the profit level, book value vs price of the stock, and market capitalization.  Then I do research to see what has been happening with the company over the past couple of years.  I also look at the industry to see how peers are performing, and what the overall industry trends are.  I want to buy those companies that have the best potential within their industry.  But, at the same time I want to make sure I am not buying into the horseshoe industry (by this I mean: if you had been looking at the horseshoe industry as a keen investment in 1800, you would have been in for an unpleasant surprise down the road – no pun intended — so I want to stay out of dying or stagnant industries).

Good look in your hunt for value!

Within the investment community, the discussions of current major issues center on extending the U.S. debt ceiling, slower growth in previous boom economies such as China and escalating food and metal commodity prices. Putting aside the big issues, other investors place their focus on the daily behavior of the stock indices and technical factors such as exponential moving averages and Bollinger Bands. Read More

I overheard a conversation the other day – a business acquaintance is drifting steadily into survivalist mode. He is taking his far-suburban property and transforming it into a self-sustaining farm. In earlier conversations, this seemed to be just an interest of his in organic farming and environmentalism, but now he is talking more and more of the need to be able to survive in difficult times that he predicts are coming soon. Read More

PART TWO OF A TWO-PART SERIES

As first half of the year comes to a close, eclectic conservatives may want to take a strategic look at the systemic financial risks for the markets from New York to Bangkok. By now, most investors have come to an accommodation with the “Catfish Recovery” addressed in an earlier article. (“Catfish live on the bottom of lakes and streams, bobbing up and down, moving around without any clear direction,” Scott Sambucci vice president of market analytics for Altos Research.) Read More

PART ONE OF A TWO-PART SERIES

Most investors this week will be focusing on the regularly scheduled Federal Reserve meeting on Tuesday and Wednesday and then on the government’s third estimate for the first quarter GDP on Friday.

Eclectic Conservatives may want to take a different path. They may opt to stand on the sidelines while the economy is in a “catfish recovery,” as Scott Sambucci has labeled the current business climate.

Sambucci used the phrase to describe the housing sector, but his creative coinage has been spilling into the commentary on the overall economy. Sambucci, who is vice president of market analytics for Altos Research, calls the current anemic economic conditions the “catfish recovery,” because “Catfish live on the bottom of lakes and streams, bobbing up and down, moving around without any clear direction.” Certainly, the description fits the lumbering, wandering recent markets. Read More

It has been a tough month and a half for investors.  Bad news, declining markets and so on.  The Dow settling below 12,000 again.  At what point is it time to panic?  (Hint: NEVER!)  But seriously, even the most rational investor is subject to the whims of other less disciplined investors.  So, what are you going to do in such a pessimistic market?  It is so easy to move with the crowd, and it starts to feel really uncomfortable as you watch your portfolio decline in value week after week. Read More