The issue is no longer one of waiting to see what the government is going to do; the real issue is what are we as investors going to do?
When I say the investment paradigm has changed, I’m referring to a combination of factors. There are no more solid, safe investments paying any kind of decent yield that most retirees could possibly live on comfortably. Re-read that if you have to. Investors are being forced to take on more risk for yield. Some are doing it using an income strategy, some are not.
CD rates are not just uselessly low, they’re practically insulting. Bonds were once considered some of the safest investments one could make. But now they pay next to nothing and come with all sorts of risk: think Greece, Ireland, or even Detroit as the most recent example.
The government is pushing money into the economy to create jobs. Just what jobs would that be? I’m not sure when you consider that most of our manufacturing jobs are gone. I see more college educated young adults serving coffee at the Starbucks nearby. I’m not sure if that’s just here or across the nation, but somehow I don’t think my Starbucks has the monopoly on over-educated baristas. I recently saw some statistics that indicated our manufacturing jobs in America are identical to what they were in 1941: 72 years ago. Real income is down 7% in the last 10 years.
I once had a friend accuse me of being a fearmonger. Oh really! Tell that to Betty B., one of our long time readers at Money Forever. Some months ago she wrote in thanking me for my candor in Money Forever: the excerpt below sums up her entire letter and why I disagree with my friend:
“I just hope now that my money will last as long as I live. I once lived very well but I now am trying to be frugal. I worry about older people who did not have anything to fall back on except social security, which for the first time I have to admit, I look forward to my social security check.”
Tell that to the company my son works for where employees have been forced to take across the board salary cuts in order to keep their jobs. Tell that to the millions of retirees who have done what Betty mentioned, become very frugal because they are afraid. I questioned whether he made that accusation because he did not want to face reality.
Screw it! Time to move forward, and if the government does something right let it be a surprise, but don’t count on it.
In the meantime what can we do? First, accept the new game. That not only means individual investors, but also brokers, money managers and newsletter editors. Gone are the days where we could make a pick and ride the upward tide, see our money grow, and think we were smart. We are going to have to think differently, invest differently, work harder and smarter than we have ever done in the past.
As I work with our research department I finding it very interesting just how many hours they are spend searching the world for companies and investments that will survive and thrive in a long-term economic downturn. They have some of the most sophisticated computer programs money can buy and some of the smartest and most dedicated analysts you’ll ever meet. Even with those terrific tools, they can easily spend a week or more in a particular sector screening possibilities for us to discuss as candidates we might want to recommend to our subscribers.