With no electric, no cable TV, and no internet service, Hurricane Irene disconnected me from the civilized world for a few days. Heck, I couldn’t even access the Wall Street Journal from my iPhone. In times of crisis (and Irene was exactly that) survival* is the primary focus. Everything else can wait.—And you shouldn’t be freaking out about what your investments are doing at the time.
Your portfolio needs to be stronger than that, and you need to be more comfortable with your asset allocations. As mentioned in my book, in order to be successful with investing you must be comfortable with:
- the Market you are investing in
- your individual investments, and,
- how they’re assembled throughout that market
This kind of comfort allows you to totally unplug from “the market” for an extended period of time with no fear of consequence. That’s the only way you can have a steady hand during volatile markets, and it's the only way to be comfortable when disasters like Irene hit.
When you have confidence in your investments during a hurricane you wheel out your Honda generator and know it’ll start right up. Mine has been working double-time for a long-time and it still hasn’t grunted yet. With all the troubles in Japan and their supply lines, I still love Honda as an investment: Reliable performance – just like their products.
Events like Irene demonstrate your portfolio in action. You should like what you see. This will help build the confidence I suggest you need to be a successful investor. And then, once the dust settles, you can reassess the Market from a national view.
Since my last blog the Dow has risen a few hundred points to 11,600 and gold is back over $1,800. Neither is big news. But two recent government announcements are:
- Thursday, August 18: US Department of Labor announced that consumer prices rose 3.6%
- Monday, August 29: US Bureau of Economic Analysis announced that personal income rose a dismal .3%
That’s a bad combination! Prices are up 12 times the amount of income. That means Consumers are falling behind – which, needless to say, is bad for business, bad for investment, and bad for markets.
Add to this pathetic market growth (GDP increased just .4% in the second quarter) and dreadful unemployment (9%) and what you have is the recipe for recession – just like the stock market has indicated.