09 -- Not Good
Kid: Where have you been Homer?
Kid: Are you kidding, all hell broke lose this past year and it’s the year you decide to take off! I’ve lost my shirt. My equity is down 50%; I’m selling into free falls. Everyone from the President to the new guy is telling me not to worry – just hold on, things will be better AND, they keep getting worse. I’ve tried to write a new mortgage on my house and I find it is worth less than it was a year ago by at least 20% and IT is still going down in value.
What the heck is going on Homer?
Homer: Well, I can’t say it is good to be back but to answer your question; the markets are going through a correction.
Kid: Whoop dee doo! I know that. What am I supposed to do? I am beside myself. You always know what to do!
Homer: But, you never follow my advice.
Kid: I promise, I WILL listen!
Homer: That’s a start; I guess I can’t ask for more.
Kid: So, so?
Homer: Hold your horses. I have a couple of questions for you.
Homer: Are you willing to take a loss?
Kid: I already have. My stock positions are showing losses up to 50% or more.
Homer: Then you have no loss. The loss is when and if you sell. Right now it is just a paper loss.
Kid: OK, I get it but what do I do Homer? How do I salvage anything here?
Homer: Do you have cash? I mean cash to invest right now?
Homer: OK. Is there anything in your portfolio you can’t live without?
Homer: Are any of the stock positions you own among the top 10 performers for all of 2008?
Homer: Do you have any inside information on any of the stocks you are currently holding like if they have an announcement that will drive the stock up or some incredible news no one knows about?
Kid: That’s illegal.
Homer: Yes, I know. I had to check to make sure you were not heading to jail.
Kid: So, what do I do Homer?
Homer: Sell everything.
Homer: You heard me, sell everything.
Homer: Because cash is KING. And that’s the way it is right now.
Kid: You mean take a loss?
Homer: If that’s what it takes to get you liquid, yes.
Kid: Why do you say that?
Homer: Because in two years, 2010, the baby boomers will have all hit the Social Security rolls and unless Obama has a couple of secrets up his sleeve that nobody knows about, the America economy will be in the throws of another recession following the one we are already in.
Kid: Are you kidding? This can’t happen.
Homer: Yes it can. I saw it once before. It can and will happen unless get off your duff and start doing something about it.
Kid: What do you mean?
Homer: Every time the government comes in to rescue the economy rather then let it sort itself out as it is doing now, they prolong and deepen the inevitable. What goes up historically always comes down and to presume that Big Government can fix it all is the most arrogant of stupid conclusions ever hoisted over and on the public. The government can’t fix anything let alone the economy. They don’t know how to manage and most elected reps in government have never had to put in a hard days work in their lives and most have not lived long enough to know about sacrifice.
Kid, our government is corrupt and becoming more so. The longer we permit them to stay in power, the more beholding they become to special interests. And you and the rest of your soft buddies are so scared now, you will lose something, you are letting them tell you what to do and how to do it. Short of turning the whole place upside down in the next two elections, we’re in for some pretty hard times. As I said, cash is King.
Kid: How long will this last.
Homer: Until the next war or until you throw every one of those in office out of office and get people in office who care about you and not them.
Kid: Oh my God!
Homer: Sorry kid. Those of us too stupid to see the lessons of the past are bound to repeat them.
Kid: So how do I protect my family financially from this debacle?
Homer: Buy hard assets.
Kid: Hard assets?
Homer: Yes. Buy gold, silver, diamonds, other precious metals and gems.
Homer: The easiest way is to invest in the companies that mine it, deal in them or distribute them.
Kid: Should I buy anything in the market other than precious metals?
Homer: You have lots of choices. One field that re-ignites in a recession is education. It doesn’t take a rocket scientist to figure out why. And Kid, just stop being afraid to trade.
Kid: What else?
Homer: You have exhausted me Kid, we're through for the day.
Kid: One more question.
Kid: What about oil?
Homer: Unless we start drilling for our own, the Middle East cartel has us. The price will go up again. Start thinking in terms of $5.00 a gallon not $4.00 and think that our own government wants the price to go up so that we get off the oil kick and go green. It’s kind of like what I refer to as biting ones elbow to spite their face. Is this not brilliantly stupid?
See you later Kid.
Kid: But, I’m not through…
Homer: I am.