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The Alchemist (03/15/2009)
By Al Thomas

BYE, BYE, BABY; NOT BUY, BUY, BABY

Been listening to the investment analysts, brokers, financial planners and cheerleaders on CNBC-TV?

All the financial publications are listing their “favorites” to buy or hold.

Kiplinger magazine has a cover story about seven blue chips that can be bought and held forever. If you read my article last week about buying blue chips and going broke you will know more than the analysts who write these make-you-broke articles.

Some of those recommended by Kiplinger might have to be held forever to break even. Once a stock or fund has lost more than 50% in price the chance of its ever recovering to its old high is somewhere around slim and none.

The magazine writers are not allowed to mention selling anything. It might help the readers, but their advertisers would quit. As usual the little guy is sacrificed for the good of the corporation.

The same goes for mutual funds.The fund manager gets paid by the amount of money he has in the fund and not on how much profit he makes for the investors.

The idiots in Washington who are basically responsible for the financial mess are now trying to put a floor under the housing market. They want to stop home prices from falling. Do you think there is a way to put a bottom on the price of stocks? There are only about 8,000 stocks on the New York Exchange. The are 4,000,000 million vacant homes.

The stupidity of our elected officials is beyond comprehension.

Is there anything to buy now? Yes, but not much. Almost every domestic stock is not worth owning. Maybe the bear funds and gold. The mavens on TV, writers in newspapers and magazines and those on the radio keep saying not to sell. The market can’t go any lower.

The market is not listening to their sage pronouncements. It will do what it wants when it wants and not when investors think it should.

One of the best long term strategies is to know the overall direction of the market – up or down. Only then an investor can protect his capital. There will be times he is sitting on cash for long periods. There are times when the market is going down. The investor in cash is making a reverse profit. When the market becomes a buy again he has cash to buy many more shares than he held before.

Brokers and financial planners will tell clients this can’t be done. Wrong! It is easy to do. In the newspaper Investors Business Daily there is published a Mutual Fund Index. (forget the other stuff they show). When the 200-day mutual fund index line is ascending the investor can buy and hold. When it turns down the smart investor goes to cash in either a money market or CD. This will protect capital in a down market.

There are times to buy, buy, buy. There are also times to tell the market bye, bye, bye. This is one of them.

You may receive Al Thomas’ investment letter that profited 15% in 2008 at no charge for 3 months on the web site www.mutualfundmagic.com Never lose money in the stock market again. His book “IF IT DOESN’T GO UP, DON’T BUY IT!” has

become a classic. Copyright 2009. Williamsburg Investment Co. All rights reserved.

 

 

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