Gut Check Time
Research for Online Investors

by John Dalt

6/16/11

The market has pulled back.  It is almost back to where we started the year.  Retail investors are doing their job, selling out of fear.  Do you have a plan, or are you reacting to every headline?  Were you deluded into thinking the market would only go up?  We have had a heck of a run since March of 2009, but it can’t go on forever.

After three years writing and editing galtstock.com what is my best advice?  GET A PLAN!  If you want a safe 3% return, buy a treasury.  Of course, you will lose purchasing power over the next ten years, but you will sleep well at night.  You will have to, because you will be working to make up for your losses on the treasury bonds you own.

I don’t want to insult you, but what are you thinking?  Are you thinking the world is going to end?  That dogs and cats will mate in the streets?  Maybe the best thing is to play golf, do something you enjoy.  Maybe that will keep you from worrying about the market.

Grab the pigskin....now!

Like my old high school coach used to say when things looked bad, “This is gut-check time.” This is not to suggest you sit on losers and let them get worse.  You should follow your stop losses and step to the side on stocks that violate their stop. Otherwise sit tight.

While you are fretting over your stocks that are down, are you also looking for stocks to buy? The stock market is the only market place I know of where people are afraid to buy when the merchandise is on sale. Walmart would be full of customers if they marked everything down 10% for three days only.

Our Long-Term subscribers bought Berkshire Hathaway on sale last week. The company had a terrible first quarter because of losses in Japan. Their re-insurance business was hit hard on earthquake and tsunami claims. So what?  That is the business they are in. Buffett and Munger will come back in the second quarter and “surprise” the street. We expect to make 20% in the next year on this great Blue chip company.

Today, the S&P is down 8% from April 29.  Since March 2009 we have had nine pullbacks of more than 4.3%, five worse than the present and two over 10%.  But…here we are.  Today, the S&P 500 is 90% higher than the low on March 9, 2009.

So…where are you at? Is this an opportunity to make money, or a reason to go buy treasuries? Either place you will have company. Ten year treasury bonds are quoted yielding 2.942% this morning, because of fear by investors. They are selling stocks and buying treasuries, driving the yield down.

Stock market investors with a plan are making a list and checking it twice.  Now is the time to sell laggards on trailing stops, and bank the profits.   Now is the time to buy undervalued assets with an eye towards collecting nice dividends and selling later for nice capital gains.  Now is not the time for fear, now it the time to have a “gut check.”

If you would like to follow a proven, profitable plan of investing…you can use mine.  Just subscribe to our Long-Term portfolio and relax, we will do all the work and worry, for you.  It's dirt cheap, too.

If you are more comfortable with a fixed-term guaranteed investment, check out our sister sight http://www.secursaving.com  We offer exceptional interest rates (up to 4.99%) on savings certificates.  You can beat bank interest rates and don't have to tie your money up for multiple years.

The mailbox:
I think your article on regulatory overkill is one of the best you have written. It is right on. Why is it so hard to understand that regulation is killing investment, job creation, productivity and what has made America Great? Rather than improving productivity, the question has become, "Do you comply with the government BS." I have always liked the statement that, "the government that governs best, governs least!"---Long-Term subscriber G.C.

I beg to differ with you on the debate.  Speaker Gingrich specifically alluded to it (S. Carolina Boeing NLRB case) as a lead into another question on the economy.  Regarding drilling for oil, this was specifically mentioned by Gov. Romney as well as (if I recall correctly) Gov. Pawlenty, Mr. Cain, and I think Speaker Gingrich.---subscriber P.M.

John’s reply:  Sorry if I am wrong, maybe I missed the comments when I went for ice cream.  I never heard them…and was muttering at the TV because of it!

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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