Hang In There...

I've allowed entirely too much time ( 6 months ) to pass since my last entry.  Things certainly have changed haven't they?  Particularly, the last two weeks.  Like you, I've been absorbing a lot of information about the current financial situation we all find all ourselves a part of in this country.

It appears that Congress will go ahead and pass the Economic Rescue Plan tonight in spite of it failing on Monday.  There, apparantly, have been several changes to the bill that make it more palatable for the members of congress.  The bill is certainly not perfect and, based on many Congressman's comments on C-SPAN this evening, they are not convinced it will solve all our problems, but they clearly don't have a choice and must pass something.

The other evening I watched Bill Clinton on Larry King Live.  He had some very interesting comments.  He mentioned that the government bailouts of Chrysler and Mexico during his tenure actually allowed the government to make money from those situations.  He was pretty optimistic that the Treasury Department could sit on these faulty mortgages for a while and then make money off them as the economy improves.  He felt like much of the $700 billion could be paid back and that the government could actually see a profit.  That, obviously, will only reveal itself over time, but that would certainly be a positive for the country.

Like you, I've seen a substantial reduction in our Net Worth since August 2007.  I did not move all our money into cash early on, but I have slowly put us in a situation where our portfolio is made up of about 25% cash at the moment.  I have not purchased any risky instruments this year as I continue to store up cash waiting for the precise time to pull the trigger on new purchases.  Like the year 2000 and 2001, the upcoming year will present MANY MANY opportunities for acquiring shares at very low prices.  Today, Warren Buffett bought $3+ billion of GE stock.  This is what smart people do.  But, let me be clear, they are not market timers.  These people are long term investors who prepare themselves for downturns in the economy so as to take advantage of low prices.  Capitalism is a boom/bust economic model.  For those who believe the economy can only continue to go up are fools.

Of course, you have to be able to stomach these hard times.  Personally, this is the toughest situation I've seen in my lifetime.  Over the years, I've had a couple rare situations where our investments dropped $5,000 in one day.  On Monday, in one day, I saw our funds drop $11,000.   Now, what if I would have panicked and immediately moved that money to a Money Market fund?  I would have lost that money.  Yet, I'm staying the course and just the next day our investments were back up about $6,000.  Additionally, with my current mix, I'm on target to make $10,000 in dividends alone.  There is no way I could have achieved that in a Money Market fund.

Hang in there.  Be a long term investor in low cost funds and do not be a "trader" coming in and out of the market with the intent to time the market.