I have indicated throughout 2010 when the stock market rallies, take profits and wait for it to decline before buying stocks. With the DJIA falling under 10,000 today, I would suggest identifying individual stocks you want to start accumulating. I can see the DJIA falling to the lows in July 2010, around 9,700, however, that may not mean Siemens (SI) or General Electric (GE) will fall much lower than they are today. Sticking to high quality stocks is never a bad strategy, unless you need the money you are investing in those stocks in the next 6-12 months.
The stock market has performed very consistently throughout 2010, up around earnings announcements, and down after earnings are over, as the market focuses on weak economic data. I see several high quality stocks which pay dividend yields around 4%, and those type of stocks will give you quarterly income as we wait for the market and economy to turn around, and of course you should see appreciation in those high quality stocks over the next 3-4 years. Using the strategy of Selling Covered Call Options is also a great way to earn additional income, as well as provide a little downside protection, as the earned income can offset a decline in the stocks value after you have purchased shares.
Here is the problem with this market!!!!!! There is nothing on the horizon to turn this market around, government help seems to be limited! Home owners can not only not get money out of their house through a cash-out refinance, they can’t even refinance their current loans, taking advantage of the historical low rates on a 30 year mortgage.
How is it possible someone who is paying their mortgage on-time, can not refinance their house? Why in the world do banks need to worry about your LTV on your home, when you have been able to pay your mortgage payment on-time, simply want to refinance to lock in a low rate for 30 years, and reduce your debt obligations, which would free up cash to purchase goods?????
Last week during a economic housing forum, it was discussed to allow people who are current on the mortgage, the ability to refinance and have the government back those loans. This seems like a good idea to me, and it would not add to the National Debt, which is what Republicans and Democrats are both agreeing needs to be in focus!!!!
My advice is to talk with your financial advisor about your game plan for taking advantage of a declining stock market, if they tell you to hang in there you are a long term investor and they don’t give you a educated response on what to do, fire them and call me, I would be happy to work with you.
There is risk in losing money when buying stocks, especially if you are looking for positive returns each time you receive your monthly statement. Remember, in March 2009, the DJIA was at 6,400, so keep that in mind when you are wondering why the DJIA isn’t going up much past 10,000.
In December, we will be three years into this economic decline, and if you compare that to the decline starting March 2000, it was not until March 2003, when the stock market and economy started turning around. Back then, we had the start of the War to drive us forward, now we have government infighting, corporations who are hoarding cash and to afraid to spend it. Corporations have been given no incentives to spend that cash or hire employees, only threats coming from the current administration regarding new corporate regulations stemming across several sectors.
Bottom line, my advice to the government, give incentives to corporations instead of more stimulus money. Incentives cost you down the road, stimulus costs you today, and that is what both political sides agree, can and should not happen. Until incentives come from the White House, enjoy the bumpy ride with the stock market, and the long recovery we are in for with our economy!
Buy dividend paying stocks and sell covered calls, your best chance to get paid while all of this mess plays out.
If you would like me to review your portfolio, have me give you a second opinion on your investments or hire me to be your Financial Advisor/Portfolio Manager, please email me at JimWigen@WHIFinancial.com. Continue to check my website for updates on stocks I am buying and selling for my clients.