Educate Yourself - Just My Opinion... I Could Be Wrong

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Just My Opinion... I Could Be Wrong
Brian Trumbore
President/Editor, StocksandNews.com

Folks, I have been traveling the past two-plus weeks in Turkey, Slovenia and now Austria. Initially, I thought that I would pick up some material along the way that would be appropriate for a Wall Street History article, in line with others I have done, but, alas, that wasn't to be the case. So I ask your indulgence in waiting one more week before resuming the column in its regular format.

But in the meantime, I did come across one item in the May 31-June 2 European edition of the Wall Street Journal (and I'm assuming it was in the main edition as well around the same time) concerning "Crisis Investing."

Suffice it to say, I can punch a ton of holes in this one, as the author of the piece goes to great lengths to give four crisis investment scenarios; if you believe, for example, that there will be another serious terrorist attack on the U.S., or, that the U.S. invades Iraq.

What I find to be ridiculous are the solutions. Without naming the strategists or advisors, we have some of the following ideas.

--Put 50% in gold and other precious-metal shares.

--Purchase 20% in U.S. Dollar Index put options.

--Unload risky assets and stocks, like low-grade corporates. [Nothing wrong with this, necessarily, but you should have already done it...and in the interests of full disclosure your editor still has some "junk" bonds of his own.]

--Put 40% of your money in the Japanese stock market.

--Buy FT-SE put options on the U.K. equity market.

--Invest in hedge funds.

--Buy a "long-short" equity fund. [Similar to a hedge fund.]

--If you aren't too nervous, invest in "quality blue chip stocks."

--Buy Swiss bonds or Swiss-Franc deposits.

--Buy energy stocks in case we invade Iraq.

Here's MY point. Some of the above may make sense for more sophisticated investors, but if you are relatively new to the investment game, or even if you are somewhat experienced, what the heck is wrong with the following...CASH!!!!

Not one of the experts in the Journal article recommends it, outside of a gentleman who suggests putting a few assets in "short-dated government paper, including U.S. Treasuries."

I could go into great detail on the stupidity of some of the above, but why bother? If you aren't sleeping at night, and, knowing that the U.S. equity market is, by most historical measurements, still grossly over-valued, particularly given still rosy earnings expectations, throw the bulk of your assets in money market funds or short-term Treasuries (6 months or less, for example), or CDs and relax...as much as you can given current world tensions.

This uncertain environment will NOT just go away in a few months. It is here to stay, conceivably, that is, for years (if not decades). You can try to "trade" it, as yours truly will do in sectors like energy from time to time, but if you are a relative novice, at least until you have more confidence in your own investment ability or that of your financial advisor, do the only prudent thing. Sit it out, largely in cash, until you feel more comfortable doing otherwise.

[I am well aware that cash right now doesn't pay, i.e., the interest rates are extremely low. But you still have your principal and rates will inevitably rise later on.]

In all sincerity,

Brian Trumbore

Wall Street History will return in its regular, albeit quirky, format next week.

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