I only have a few minutes before I have to run, but I am watching this market action and it screams one thing to me - BE PATIENT!
I know everybody wants to "make a trade" and I do some of that, however, the majority of your money ought to be more patient. As I've recommended time and again the past year, hold 25% to 50% in cash equivalents. There are several huge buying opportunities developing. I covered some in my recent webcast "My Investment Approach."
A few things to get into your mind:
- You must acknowledge "slow growth forever" and that it means many parts of the economy and stock markets will move sideways for a long time.
- Accept that climate change is real and that 196 nations are pushing alternative energy - thus that's where some huge opportunities lie.
- Understand oil and gas will still be around for decades, so this huge sell-off represents awesome opportunities to buy the survivors.
- Water and food are about to run into socially important scarcity issues due to under investment and climate change - companies that build and support food and water resources will do well starting very soon.
- There are always opportunities in technology that can expand its footprint and protect its pricing power.
- There are always opportunities in healthcare, but remember to beware politicians with axes.
In a slow growth economy, central banks and governments will do what they always do. Print money and spend money. The alternative is a depression. They won't choose a depression. They'll choose to tread water as best they can. With more money to be printed over time and governments extremely likely to address the planet's carbon footprint, as well as, food and water issues, keep an eye on where the limited growth will be.
The money printing will eventually be enough to offset the deflationary forces of demographics and accumulated debt, resulting in inflation. Inflation plus slow growth equals stagflation. That is what is coming. That is why I still and likely always will lean towards investing in companies that make money on hard assets and commodities, as well as, technology.
In short, go about working and accumulating more cash. If you're retired, remember that you're going to live a long time and that you'll have to get back to being 75% invested in equities soon - I know most of you aren't.