Landing The Plane

January 19, 2009 on 6:44 pm | In Baby Boomers |

This morning, bright and early, amid the better than postcard-like brilliance of fresh snow glistening like a frosting on the trees of Connecticut, on this Martin Luther King Monday, I did a live radio interview on WEKZ in Monroe, Wisconsin to answer the question “Should Baby Boomers Be Investing in the Stock Market Right Now?”.

Scott Thompson, the host of “The Morning Mess” on WEKZ, asked me how can we spend trillions of dollars we don’t have on an economic stimulus package, when we already have a 2 trillion dollar budget deficit that at this rate would balloon to $20 trillion more of U.S. Debt by the time the Obama Presidency is done.

My answer is this: we clearly can’t sustain such a cumulative deficit over the next 8 years; but properly conceived and carefully executed, a high impact stimulus investment now will pay off later in more jobs, a restored and streamlined national infrastructure, a more competitive educational system, greater efficiencies in the economy, drastically less government waste, and higher federal tax revenue. But there are many ifs. There are many factors, interwoven together, that need to be perceived, managed, and adjusted with great presence and clarity during this delicate process. In effect, the new President and his team must draw upon and exert the same agile, steady, and strong skills that were shown by the heroic airline pilot who recently landed his disabled plane smoothly and successfully on the Hudson River. With Inauguration Day tomorrow, we all need to say a prayer of thanks and support on behalf of the new President and his team. The challenges involved are certainly “stimulating,” but I fully believe they have the experience, the skills, the values, and the temperament that are needed to successfully “land this plane.” God Speed.

Two other comments I made on the show:

It’s dangerous to try to be a stock picker in today’s environment. It’s too risky for most retirement investors to try to outguess what’s on a company’s balance sheet, what shoe will drop next in the consumer economy, or what company will not be able to borrow to continue paying its dividend yield. Best bet for now: invest in a low-cost diversified mutual fund or ETF made up of the S&P 500 Index, and flow in your investment over the next 6 to 12 months. It’s just too hard to outguess the market, and the market could still fall another 20-25% before it hits bottom. I do think “the market” (i.e., the S&P 500) will come back, but not all stocks within it will. More than a few will disappear, wiping out the equity of their shareholders in the process. But even with 3% inflation, or deflation, it’s a better place to be than fixed income investments in my opinion. Keep a 6-12 month emergency fund in cash, and buy some gold coins.

That’s my advice for today–a day to celebrate our country, our purpose, Dr. King’s great speech, and remember the responsibility we each have to sustain our nation’s dream and values of freedom, individual initiative, opportunity, and the rule of law, a purpose unlike any nation in the history of the world.