Clients' Concerns

Here are five questions/statements I've fielded over the past few weeks, followed by my responses... See if you relate...

1. Can you tell me anything positive?
2. Can you give us hope that things are coming back?
3. It'll take a long time to make back the losses of the last few months.
4. If things get much worse, shouldn't we move to cash and wait till things look better, then get back in?
5. This is a great opportunity, what should we buy?

1. Can you tell me anything positive?
Response: In terms of stocks, bear markets tend to bottom amidst extreme fear. That's when share prices have been beaten down to extreme levels, cash is at extreme highs, and interest rates are at extreme lows... The things buyers dream of... (stocks can certainly stay cheap for awhile however)...

2. Can you give us hope that things are coming back?
Response: Throughout the ages "things" have always come back. And while political headwinds are stronger than I've ever seen them, I believe markets will nonetheless (ultimately) prevail... There remains a world of opportunity out there... particularly in emerging markets where you have the demographics and the desperate desire for better lives... Read Wildly Optimistic... and It's Not All About the U.S. Economy...

3. It'll take a long time to make back the losses of the last few months.
Response: That may be, however, even after the recent sell off, stocks are up roughly 70% off the March '09 bottom... That's a big move over a short period... And while I can't guarantee anything related to market timing, I can guarantee that if you sell (haven't lost until then by the way), it will take a very long time to make it back...

4. If things get much worse, shouldn't we move to cash and wait till things look better, then get back in?
Response: You haven't been listening/reading, have you? If you move to cash, you want things to get way worse (way cheaper), then you get back in...

5. This is a great opportunity, what should we buy?
Response: Nothing if you're at your target to equities... If you happen to be underweight however, you rebalance or add more, but you stay diversified... Our typical portfolio today is (roughly) 25-35% staples, 65-75% (strategically) everything else... I especially like technology (long-term), financials look interesting here as well (they're getting creamed), but, again, I wouldn't overweight any one sector...