Streetwise
Lauren Rudd
Sunday, May 24,
2009
Some Thoughts For Memorial Day
Memorial Day is upon us once again. For many it will be
simply a day off from work and a time to drag out the barbeque grill for the
season’s first summer party. However, for others it is a somber reminder of
friends who sacrificed their lives in the name of freedom.
Regrettably, the devastating impact of armed conflict has a
way of fading from memory. Few are left who can recount the untold horrors of
the Holocaust. A younger but graying generation pushes remembrances of the
sickening sweet smell of Napalm and burning flesh ever deeper into the dark
recesses of their minds.
Nonetheless, the jarring impact of seeing young soldiers with
scarred faces and missing limbs not only unleashes a gushing torrent of emotion,
but hopefully will also act as a constant reminder of the seemingly never ending
violence and bloodshed that takes place across the globe in the name of
security, peace, tranquility...oh, and yes religion.
If you saw Vietnam, Afghanistan or Iraq regurgitate the
remains of your friends and classmates then Memorial Day cannot help but be a
day of particular significance. Nevertheless, for all of us it should be a time
to remember and honor those who have been called upon to make the ultimate
sacrifice.
You are probably wondering how those comments relate to
investing on Wall Street. They do not...except to point out that in today’s
world it is especially important that we focus not just on what we want but also
on what we can give back.
Traditionally, this is also the time of the year when I
discuss the subject of when and what to sell. For example, simply holding
unrealized profits is never a reason to sell. Too often the issue of when to
sell is treated in erroneously general terms such as, "the market is going up,
sell," or "the market is going down, sell."
Deciding when to sell is the single most difficult decision
any investor has to make. Moreover, I would be the first to agree that it often
takes super human strength to decide the matter dispassionately. Given that it
is Memorial Day weekend, I again suggest you contemplate the words penned over a
century ago by Catherine Lee Bates in the song, "America the Beautiful." She
wrote, "Confirm thy soul in self control."
Although the financial markets of the past two years have
demonstrated unmercifully that the traditional multi-year buy and hold strategy
has to be reevaluated, continually turning over your portfolio will often result
in profitless whipsawing. And never let others, especially those who stand to
receive a commission, make the decision for you.
Instead, take your queue from the various trends that are
embedded in the economy as evidenced by the data in ongoing economic reports.
You then translate those trends into specific sectors from which you select your
candidates. Remember that a portion of any unrealized profit belongs to Uncle
Sam. As long as you do not sell, you can continue to use his money to enhance
your gains...interest free.
Now I know what you are asking yourself, what do I recommend
selling? Last year at this time I suggested General Motors and Citigroup.
Motorola also made the list of those with a sad story of incompetent management.
Yet, this year is different. The economy is on the road to
recovery and I look for solid improvement by 2010. Therefore, now is probably a
time to be buying stocks, not selling them. Several weeks ago I faced down the
soothsayers of doom and recommended you look at Bank of America. The shares have
nearly tripled since then.
However, be careful of companies whose fortunes are tied to rising employment,
such as the housing industry. Unemployment will decline but there is a
considerable lag time in comparison to the rest of the economy. Another caution
would be directed at bonds. If you have a bond portfolio, keep the duration
relatively short. Interest rates will likely begin to rise in 6 to 8 months,
resulting in lower bond prices.
