Liquid Gold

Pay NO Attention to the Man Behind the Curtain

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We've been having some horrible times in the market for the past few days. The credit crisis keeps expanding and pundits are calling for all sorts of horrible earnings and events. Downgrades are appearing left and right and the general message is doom and gloom; pensions are disappearing, banks may fail, and boomers may never be able to retire.

HOGWASH to all of the above. Does anyone remember the Wizard of OZ? The "Wizard" was calling all the shots and when questioned, his classic line was "Pay NO Attention to the Man Behind the Curtain." That very advice holds true in today's market climate. Here's why.

Do you believe that our whole financial system is at risk and will fall apart? If so, take a look at the financial history of this country, beginning in the 1800"s with the tulip bulb bubble. That bubble pricked and moved on to railroads, steel, and other bubbles. Review the depression and the lead up to that decade. Other items of interest are the savings and loan debaucle of the Bush One presidency, the irrational exhuberance in tech stocks of the 90's, and the market reactions to 9-11-01.

Many of you may not recall these items, especially if you weren't investing during those years. Well, let me be a calming influence to you, because I'm old and I've been investing since the early sixties. I've also got the experience and the profits to back up my words. No, I wasn't around for the great depression of the thirties, but my parents were so I feel well schooled in that era, too.

Stop listening to the entertainment talking heads and start your own thinking. Look for p/e's. Look at dividend yields. If you don't know what either of those items are, then you're not investing. When you buy a company, you're purchasing it with the expectation that it has a future going forward and that you will participate in it's profits. You want earnings growth potential and a dividend to cushion you in the worst of markets. Remember that earnings drive the market and will push up the price of your stock.

Take your age and timeframe into consideration. It doesn't make too much sense for me to invest in something that may payoff in five to ten years, but it may make sense for you. Want an example? Then look at the demographics. They baby boomers are not going to live forever. They will need new joints, lots of medicine, medical facilities, senior housing, dental care, pet care for their animals, financial management, and eventually cremation and burial. There's a slew of companies providing these services to pick from in virtually all of these areas. Check them out yourself. Look at their history, their p/e's and their guidance going forward. Avoid any who are heavily in debt as their future prospects could be impaired. If you find one that looks good to you, then purchase some shares when the talking heads are spouting gloom and doom. Sure, your stock could go down a little, but if the p/e is low and the fundamentals are sound, then you're in it for the long term and you'll be rewarded over the years.

These words are from an investor that bought APPL under 10, PEP at 29, and COP (when it was the old Phillips Petroleum) at 16. Yes, I picked them up in the 70's. 80's and 90's and used the same method outlined above. I also bought utilities in the 1960's and retired almost two decades ago because their dividends were paying me more than my employer.

If you don't like the boomer play, then watch the commodities. They are more immediate, but once again, I urge you to do your own research. The gold mining companies are paying anywhere from 190 dollars to 390 dollars to get an ounce of gold out of the ground. Find a company with large reserves, a low cost and good earnings going forward. (Since gold is going for over 950 dollars an ounce at this writing, the earnings picture looks pretty bright for the shiny metal.) This country's failure to provide a strong dollar policy portends an even brighter picture for the future.

Learn economics, do your own thinking and research, remember no one will take care of your assets like you will, and most of all pay NO attention to the man behind the curtain.