Individual Investors
It appears we had a major top put in back in April, confirmed by the recent drop below major
support levels on the S&P 500 and the Dow.. This is when you must be willing to make
substantial changes to your holdings, becoming much more conservative, in order to protect your
assets and set yourself up for the opportunities ahead. The downturn is not over, it is intensifying.
The government chose more stimulus and debt instead of the necessary medicine of sudden,
massive debt restructuring. We are now in a period where, at every level - personal, family,
business, political, etc. - we must be more flexible in how we adapt to new situations and the scope
of the changes we are willing to make. Watch for critical updates in the weeks ahead as the release
of 2nd quarter GDP gets closer. Consider shorting the markets when the time comes.
Investment Advisors
Begin the process of moving your clients to a conservative approach and even perhaps a short
position. Shed the old style of buy and hold and embrace a more pragmatic, flexible approach to
investing so that you can maintain and grow your clients' wealth in the weeks and years ahead.
Don't believe the hype of recovery, the recession is still here and is gaining strength. Review the
Consumer Metrics data for real-time analysis on where consumers are, which drives 70% of GDP.
This is something you did NOT learn in econ 101 or get out of your B/D training sessions.
Real Estate
Home sales after the end of the tax credit showed the true colors of the housing market - it's awful.
It will get worse. Defaults are high, but foreclosures have stalled out because banks are at a loss
as to what should be done with all of them. At some point, the system will have to capitulate and
recognize the massive losses and write-offs. In the meantime, the high end of the spectrum is
feeling the most pain with jumbo loans requiring 40% down and significantly higher interest rates.
Sell what you can now, in the summer of 2010, and look for great buys especially between late
2012 and early 2013.
Business Owners
Flexibility and adaptation is everything. Continue to cut capital expenditures and unnecessary
overheads. Focus only on short term investments that increase sales or cut costs. Consumer
Metrics data shows the continued deterioration in economic activity, and a recent survey revealed
that small businesses aren't borrowing because they either don't need the loans because of slow
sales or they already are carrying too much debt. Secure, but don't use, credit if you can, and
hold out for better opportunities to expand market share in the tough times ahead.
