For Clients Only: Concerning April

 

This will not be a long report, and it won't touch on anything that you haven't heard several times in the past. But as you know from experience, I try very hard to repeat things that are important to your financial/emotional well being, and often. Over the past 25 days, two things have happened that are causing you to raise an eyebrow, to experience some pangs of doubt, and to watch your market value numbers much to closely. If only they would just always go up! You'll note that the feelings are similar to those you experienced last August through October. The two things are:

 

1. The five-month rally in quality stocks has come to an abrupt halt this month… not a huge decline yet, but certainly a pause in the green pointing arrows. Some profit taking has blunted the decline just a tad…

 

2. The constant, almost predictable, monthly increases in short term interest rates continues to batter the market price of your very good, very safe, and very productive income producing securities… both tax free and taxable.

 

With the cessation of the Equity rally, there is nothing to offset declining Income Security prices, a double whammy for short-term portfolio values. Why Short Term? Because short-term interest rates will eventually stop going up… particularly if rising energy costs dampen the growth of the economy, as is being prognosticated all around you… especially by that political party that never admitted that the economy was strong in the first place. And, because every time there is a correction, I get the opportunity to replenish the Equity side of your portfolio with fresh (and cheaper) inventory to be sold some time in the future. Without corrections people, we would be perpetually in cash because we know how foolish it is to buy high. Note that very few dollars of profit were left on the table before these April problems started.

 

One other thing, never forget that Wall Street thrives on your fear and discomfort. Your portfolio positions will be lower in value than what you paid for them. THIS IS THE PLAN! I've sold the winners, and I'll buy more of the Income Securities ASAP. Every winner we've ever experienced was in a negative position at one time or another. If your statements show large profits in a security, then I'm not doing my job.

 

So lighten up, loosen up, and think back to the All Time High Profit levels that you experienced just a short month ago. My methodology requires corrections in both equities and income securities, and regularly. Make your retirement plan contributions and new deposits every time your Market Value falls and you'll make it easy for me make your portfolio grow over the long haul. Your Working Capital (http://www.sancoservices.com/workingcapitalmodel.htm) continues to grow every day, as does your income.

 

Please call me if you have any additional questions or concerns; don't worry about a thing, there will be new All Time Highs in your future. Historically speaking, this correction should be relatively shallow and relatively short (because it really wasn't a steep or a fast rally). There will always be corrections, and that's a good thing. Try to relax… please… and please reread the Income Investing articles linked to in the left hand column here: http://www.sancoservices.com/fixedincomeinvesting.htm.

 

 

 

Steve Selengut
http://www.sancoservices.com
http://www.valuestockbuylistprogram.com
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"