This is the Time that Fortunes are Made |
12 Comments |
Last October I asked, where would you put money now. I noted that quite a few things were expensive. Investments that were at full time highs were: Oil, the Dow, the price of gold, emerging markets, and China. I finally decided on a regional banks ETF despite the sub-prime mess. At the time, the price was around $40 a share. It’s a little lower now - I’m happy I didn’t move any money.
I decided to back at some of the comments made to see if anyone was wiser than me. Almost everything has gone down, so I can’t be too hard on suggestions. A few people suggested buying VMWare. I hope they didn’t buy that themselves as it’s way down about 40-50% since October. There were some good recommendations in there as well. One commenter mentioned that you couldn’t go wrote with First Solar. If you listened to him you could have doubled your money - provided you sold at the absolute top.
Enough of dwelling on the past, let’s look to the present and future. The Dow is has dropped from 13892 when I wrote the article to 12192 as I type this. Many China stocks are down from their high. Vanguard’s emerging markets ETF is down. Oil went back down, but close again to it’s highs. This gold ETF just keeps going in one direction - up.
So what do you do now? Do you go buy more gold? Do you buy something that mimics the US stock market now that it seems to be cheaper than it was in October? I’m a value guy and hate paying for things at the top. Here are two places that see possibly making some people a lot of money. You might have to buy and wait 5 years, maybe 10-20, but I feel that they’d pay off quite well in time.
- Technology Stocks - The Amex Technology Spider ETF is down from around $27.75 to around $22.50, making it seem like a solid choice since earnings have been fairly good in the area. Its odd for me to believe, but Apple, Google, Microsoft, and Cisco as value plays? It’s true. It’s very rare that you get to buy market leaders at a discount. Though some of them have shot up in price over the last year or more, I believe that now is a chance to get them and hold them.
- Real Estate - This one depends on where you are looking. In northern California home prices haven’t come down much. However, in Boston where I’m originally from, it seems you can find some home prices off as much as 30-40% from two years ago. Like tech stocks, the price may have been inflated in the first place. However, discounted prices combined with extremely low mortgage rates, makes this very tempting. I have a friend who knows he wants to settle down in a Boston suburb in 2-3 years. Due to some life circumstances, he can’t live there until then. He’s thinking of buying a home now and renting it out until he can live there. He reasons that if he just breaks even (or loses a little) with rent, it’s better to get this price than pay 15% more and a higher mortgage rate. This seems like an extremely smart plan to me.
I’ll leave you with the best call of the comments from that October post. The Div Guy said, “I think the Sox can win the next 3.” He wasn’t quite half right, they won the next 7.
This post deals with: ... and focuses on:Economy
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Propeller12 Responses to “This is the Time that Fortunes are Made”
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February 21st, 2008 at 9:10 am
I’m trying to position for the long term:
* Commodities, any kind of natural resource…including water! - see nowhere to go but up due to growth in world demand.
* Healthcare - regardless of our policies, I think it is solid longer term.
* International - I already have about 25% of my portfolio here (15% emerging mkts, 8% Europe)…am beginning to think as much as 50% overall is not ridiculous. Looking to balance out countries (add Latin America? Middle East / Africa?) and find a way to get some exposure in small caps (5%?).
Foreign currency - still very much considering FDIC insured CDs (but still have currency risk)
I pushed in a few more thousand here and there in January (commodities). I have 18% of my portfolio in T Rowe Price Cap Allocation (has been very nice offset to recent losses) and had been looking to allocate some of that to some of the more downtrodden investments. However, I haven’t actually done so…yet.
Unfortunately, between fully funding my 401(k) and Roth IRA, there is not a lot of free cash readily available (thus the potential shift of Cap Allocation fund). I do have a large cash position in 12 mos CDs ($100+K @5.2%), but is for potential home purchase and so “off limits” to equities.
February 14th, 2008 at 2:05 pm
Ah hindsight. I’m an index guy so you won’t get much from me other than keep buying the index and don’t look back. MSCI All World is my pick. It has domestic, international (developed), and emerging markets. Get them through Vanguard for low expenses. If the media keeps up its drum beat of recession and bad news (as I expect it will) then maybe mid-year or even as late as early next year it may be a good time to be REITs but again I’d go with an index. For right this minute TIPS and/or Muni bonds may not be a bad place to be either. All of my suggestions come from my 30+ year time horizon. Check back then to see how I’ve done