Tuesday, January 13, 2009

My Predictions for 2009

(Your lucky stocks are ...)
"A very powerful and durable rally is in the works. But it may need another couple of days to lift off. Hold the fort and keep the faith!"
Richard Band, editor, Profitable Investing Letter, Mar. 27, 2008

No one knows the future but we still predict. It is a speculative rush – maybe what I predict will come true otherwise I can act like a hedge fund or actively managed mutual fund and claim unprecedented events trumped my superior judegment. Black swan, white swan, Canadian geese – something is bound to happen so why not throw my hat in the mix.

From my layman’s perspective – the outlook is rather bleak and getting worse. Businesses are suffering and my recent trips to the mall confirmed the notion that all is not well. No buyers even when goods are marked 50-80% down. That is an indication of retrenching consumers and means less spending or less profits. Less profits means less stuff to make which means less workers needed and thereby higher unemployment.

Housing is still sucking wind. All housing indicators are still pointing lower and the situation is dire. It started with housing and will probably end with housing. But the bottom for housing is not obvious and till that happens – we will struggle. Credit, lending, interest rates and savings rate all point to a bleaker financial picture in 2009.

Are there positives? A new President, tax breaks, more stimulus, low interest rates … are some of the positive indicators but are they enough to prevail over the more depressing macro economic conditions. In my humble opinion – probably not. It will probably get worse before it gets better.

So what are the options for an average investor? Three options I am pursuing include

  1. I am gradually and regularly investing in equities - both domestic and foreign via index based automatic plans. I am also picking up some individual stocks of companies that are selling at bargain prices. I am more nibbling versus gorging because there will be more opportunities to buy at even cheaper prices (probably).
  2. I am diversifying by investing in real estate. I am working with a local investment club to get ownership interest in rental properties. The club is buying dstressed properties which are cash flow positive and will reap excellent returns once the market turns.
  3. And finally I am watching my bottom line - conserving cash, reducing my spending and looking for opportunities to improve my cash position.

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