Posted on | July 29, 2011 | Comments Off
Things are not looking good in the US economy and stock market. Let’s be honest. This morning, GDP numbers came in extremely low. The Q1 numbers were revised down to .4% growth, and Q2 came in at 1.3% growth – note that Q2 will likely be revised lower. Please note that this is nominal growth. Factor in any legtiimate inflation data and you see absolute negative real growth in the economy.
Things are not good, and it appears as if the system is close to a point where we will see it unravel somewhat – similar to the 2008 crash. This is purely speculative, but I don’t see the clean way out of the mess we are in. I still believe that the politicians will choose the path of inflation which is why we’re so high on gold.
So what do we do in this nasty environment which seems like it’s getting worse slowly?
We stick to our strategy. And we remain defensive. Let’s review our strategy.
- We want to stick to only high quality companies with great balance sheets, recession resistant businesses and international revenues
- We want to remain extremely patient with stocks, allowing months – even years – to pass before doing any massive accumulation of shares.
- We want dividends, dividends, dividends – this is guaranteed money in your account when paid. We don’t hope for future stock appreciation – we count on present dividend cash flow.
- Our time horizon is long-term. Our strategy may not pay off for many years because the next few years look to be very tumultuous. If it pays huge in the end, that’s all that matters. We believer we’re on the right track regardless of short term results.
- Lastly, we remain overweight in gold because we believe stocks will become cheaper when priced in gold over time. the Dow/ Gold indicator is a decent way to measure this pricing. Click here for more details on this.
When it’s nearly impossible to have confidence in the economic policies of our country, its leaders and the ability of our economy to self grow out of the mess we’re in, we must put our confidence in our defensive strategy for investing. We’re not here to gamble. We’re here to allocate our capital into dependable and conservative investments.
You will notice our target purchase prices on our dividend portfolio are pretty much all significantly lower than the current trading prices. This isn’t a mistake. We believe volatility is coming and we’re ready to jump on it.
Put your confidence in your dividend investing strategy, not in the leaders to be able to keep the stock market propped up. It’s going to come down eventually.