Not Going to Say I Told You So – What To Do Now?

Hello everyone – I am writing to you today from San Francisco where I am visiting a couple of clients; and when I’m here, I always take the opportunity to visit 2-4 investment companies (SF counts many interesting investing companies as residents – some of the better known are Dodge & Cox and Barclays, along with Matthews, Icon, and Pensco – a leading provider of self-directed IRA’s). Interestingly, this weekend is the start of Fleet Week where there will be among other events, airshows by fighter pilots. Also being Columbus Day weekend, there will be a fireworks show tonight in North Beach, the Italian (restaurant) section of the city.

Ok enough of the side-talk and let’s get to the point of today’s article. Even if you have been a casual reader of my articles, you should have discerned the financial trouble our economy was in. From my own articles to links to videos of smart people in the financial field, I hope you have saved yourself some financial pain.

We discussed economic weakness, reasons you should horde cash, house price pressures, stock market weakness and MANY other ideas that each could potentially have saved you thousands of dollars by heeding (use the search term on the right and you’ll find any of these and other topics discussed). I enjoy writing these articles to give you a little insight into what I’m thinking and doing with myself and my own clients. My goal is that they get more insight into what I am thinking and that maybe a few hundred random people in web land get some helpful ideas – and I do this for free! Seriously, check out my past articles (over 130) – there is a lot of good stuff there!

With that said, we come to what to think about now. What should you be thinking about? Here’s a few points I would like you to think about – and these points come from my discussions with clients because these points are the topics that have been coming up at recent meetings:

  1. Even though the market looks like it might have bottomed (Friday was quite a reversal day – almost), risks still abound so if you were out of the market be careful aboutĀ  how quickly you redeploy capital. For the record, I tried to get into a few names I liked too soon, and I ended up paying some “tuition” (i.e. losses accompanied by a learned lesson:) ) for that mistake!My need to act sometimes overrides my patience.

  2. House prices may also not be at a bottom. Think about this: calculate what a mortgage would cost on a monthly basis if you bought YOUR current house at today’s market prices….did you do it? OK second step is now recalculate that same mortgage with 8 or 9% rates – does the payment rise substantially? Good now you understand why house prices may fall farther.

  3. Cash is still the reigning king. I have talked in the past about how having cash will allow you take advantage of some great buying opportunities in the next few years. Also, with credit tightening, I wouldn’t rely on home equity lines or credit cards as my only “liquidity.” You need real cash. I advised someone recently to not pay off their 0% credit card with a large tax refund but to put that cash in the bank because I was more worried about their liquidity than their debt (they own multiple properties and cash levels were low in my opinion). Consider this for yourself – are you relying on lending facilities to keep yourself liquid? By the way, this is part of what is sinking many companies these days, they need money and go to the bank to use their line of credit and the bank shuts them down – don’t imitate these corporations in your personal life!

  4. Save, save, save! Something that aggravates me to no end (other than our politicians’ lack of understanding of economics) is that people don’t save. And what really irks me, is that it is not something taught or encouraged anywhere outside of the financial press. You should be saving – but what do elected officials do when they want to spur the economy? Give you checks so you’ll spend more! This is just like our government does – that’s why they deserve to implode – let me tell you now – save! Don’t worry about the economy – it must adjust and correct for massive levels of overspending by individuals and government. Only after we correct for all this excess, can we begin to recover – government intervention only delays the pain – we must go through it.

  5. Cut expenses please. This goes in line with the above point. When you make a big purchase or financial commitment, many of you subconsciously make the following ASSUMPTIONS: 1. you will absolutely not lose your job (cuz if you did you couldn’t make the payments right?). 2. you will not become disabled (most people are horribly under-insured here). 3. your income will rise to meet rising expenses. So please, don’t stretch yourself now.

These 5 points should help you right now to navigate what is going on. My advice sounds almost “Aesop-like” but if more people heeded the lessons of the “ant and the grasshopper” they would avoid big financial messes. Don’t you agree? Comment if you have questions, thoughts or points of discussion.

By the way, for further background on the current issues, see thisĀ  great video from Ron Paul where he explains the government response to our recent problems: and the problems they are causing: VIDEO. After watching this, you will understand why you should still be worried.

Chris Grande
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