- Posted August 26, 2011
- Tweet This | Share on Facebook
Looking for serviceable dividends in a shaky market? Forget the startups
Dear Mr. Berko:
Where do you think the Dow Jones could be a year from now? Do you have any investment advice that takes into account the recent market crash? I'm stuck and didn't get out so my account is down about 30 percent. I've included a copy of my IRA.
Unlike me, my wife got lucky, and, acting on a hunch, she liquidated her IRA ($138,000) a week before everything turned to mush. What recommendations would you give us today? Would you buy Zynga or Groupon after they go public?
NP in Minneapolis, Minn.
Dear NP:
Well, holy Harry, Moe and Mary. It finally happened. And I think most of us, in that very private corner of our hearts, where truth always speaks, knew it would happen. It was only a matter of time.
Meanwhile, Pogo is said to have said, "We have met the enemy, and he is us." Not just Goldman Sucks or Stank of America, but all of us in the "give me, show me, get me" era -- all of us who mistook creature comforts and a full toy box for civilization. As Mary Hopkin (a Beatles discovery) sang: "Those were the days, my friend, we'd thought they'd never end. We'd sing and dance forever and a day."
However, the damage won't be as bad as the brainless, lovely coiffed and puerile, cleanly barbered talking heads suggest. But certainly wages will decline, unemployment will jump for an extended period of time, consumer spending will fall, interest rates will rise and more homes will enter foreclosure -- while the resulting bad humors and noxious vapors seep into nearly every nook and cranny of our nation.
This is the end of an era. The bull market is dead. So trim your bucket lists, because the American Dream that unofficially went "poof!" in 2007 is now officially " poof."
Get those high-flying issues out of your portfolio. Dump those silly stocks like LinkedIn and Zillow, and forget about Zynga and Facebook. Sell your high-P/E, fast-growth issues, flush the airlines, the autos, gaming, maritime, e-commerce and biotechs from your portfolio. Get rid of the banks, machinery, housing, appliances, defense, and metals/mining equities. I think they're all headed lower over the next year. And because I believe the U.S. will be in an economic slump for years -- Europe too -- it might be a while until corporate revenues or earnings return to their 2007/2008 record levels.
I don't know how much farther the market will fall, but I believe that it could plummet to the 9,000 level. It won't happen in a month, but I feel it in my bones that the market could tumble 2,500 points in the next 18 months. If it does, a lot of excellent utility issues will also fall, and there will be some mighty handsome yields on many darn good utilities that will be sweet music to your bank account. Then, I'd jump in with just one big foot (while keeping the other dry) and lock those yields that could easily rise as high as 7 percent or higher.
Don't you wish you had done that early in 2009, before the market began to recover, or during the bubble of 1999/2000? Americans gotta have electrical power, but they don't gotta have a new car, a bigger TV, a better desk or the latest iPhone. And if you select the right utilities, those dividends will be as safe as the angels and saints in heaven.
But the best is yet to come. When the economy recovers, consumers will use more power, utility revenues will rise and earnings will increase -- and so will your dividends.
----------
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.
© 2011 Creators Syndicate Inc.
Published: Fri, Aug 26, 2011
headlines Detroit
headlines National
- Lucy Lang, NY inspector general, has always wanted rules evenly applied
- ACLU and BigLaw firm use ‘Orange is the New Black’ in hashtag effort to promote NY jail reform
- 2024 Year in Review: Integrated legal AI and more effective case management
- How to ensure your legal team is well-prepared for the shifting privacy landscape
- Judge denies bid by former Duane Morris partner to stop his wife’s funeral
- Attorney discipline records short of disbarment would be expunged after 8 years under state bar plan