MARKET MELTDOWN, WHY IT HAPPENED

What a Brutal Day in the Market! Virtually all our accounts took a hit. Including mine. Fortunately, I know exactly why the market went down. Because it went up. This answer may seem a bit trite but its as good as any of the very complex theories I have heard about China, the deficit, or the stand off in Iraq. Fact 1. Markets are cyclical. 2. Fact 2. Timing those cycles are impossible. Fact 3. There is no foolproof strategy. The good news is that you still own the same companies now that you owned before the correction and the changes in what the markets think they are worth have little or nothing to do with the viability of those enterprises.

My Philosophy For Most Clients Remains The Same. Construct portfolios from which the major component of our expected return on investment is cash flow. Most of these will be dividend paying stocks. Even though the value of most of the stocks went down along with the rest of the market, the cash flow produced from those portfolios showed no change. This morning, I received several e-mails from the brokerage firm I use telling me that I can expect numerous dividend checks in the next 30 days. This gives me money to fund living expenses if I need it or, more importantly, money to reinvest in new opportunities that may arise. One thing I noticed about the so-called "tech wreck" early this decade, was that those who took a huge hit on those non-dividend paying stocks, had no money to re-invest in the bargains that emerged.

Common Stocks Are The Majority of Our Investment Portfolios. Since stocks historically show I higher returns than bonds and other financial assets, most of our portfolios are in common stocks. This means that the cash flow produced is in the form of dividends. Besides providing income to fund living expenses, there are several other advantages to dividend-paying stocks. 1. History shows that dividend paying stocks are not as vulnerable to market downturns. 2. Most dividends are favorably taxed. 3. Our aging population favors stocks that produce income. The bottom line is that, instead of worrying about this market correction, we are looking forward to our next dividend check.

I Am Looking Forward To A Trip To Denver. I made reservations to fly to Denver on March 7. I will only be there a week but if you need to contact me, call our office and speak to Susan about an appointment. Please put in an order for some decent weather. An old snow bird has a tough time with the cold.