Realities of Capitalism
Companies FAIL! There, I said it. It is time to stop bailing out every company. The quicker we realize that pumping billions of dollars into a broken machine will just cause inflation, devaluing of the dollar, increased national debt and more panic, the quicker this depression will end. While I realize it may not be technically a depression due to historical context, the reality is that the S&P has dropped 25% over the last 2 months. In my book that is a depression.
However, while the economy continues to look more bleak every day and middle class families continue to have problems making ends meet, there is one key aspect that we can take advantage of during this period of uncertainty:
Long term investors can buy stocks of good companies on the cheap.
This strategy was recently espoused by Warren Buffett in his NYTimes Op-Ed piece. “Be fearful when others are greedy, and be greedy when others are fearful”
Other famous investors cite another long-term wealth preservation strategy. Jim Cramer of Mad Money fame, says “And in this horrible market, I fight to keep their losses to a minimum by having some good dividend-yielding stocks from different sectors, some bonds, some gold and some cash.”
Good dividend-yielding stocks are available right now. Look at the components of the DJIA, many are paying 3-4% yields and trading at 52wk lows. In you don’t know, these yields mean that the company will pay you 3-4% on your money even if the stock stays at it’s current valuation.
The market is no longer trading on fundamentals but rather hysteria and panic. These stocks are cheap for the long-term investor. This buying opportunity – a reality of capitalism – amongst the doom and gloom won’t last long and hasn’t been seen a long time.
Feedback welcome.
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Here here! This whole notion of “too big to fail” is preposterous. Then you have Rep. McCotter from MI saying : “If GM and Chrysler are allowed to go in bankruptcy they will not come out.” SO that begs the question, if they can’t make it thru Chap 11, WHY should the taxpayers foot the bill?