THE ABC's Of INVESTING...”ALWAYS BUY CHEAP”

It might be urban myth but someone famous said “Buy Low and Sell High”. I prefer the ABC's of investing “always buy cheap”. Imagine if Costco raised prices instead of lowering them, would you buy more? Would you buy at all?

Well we have a sale going on in commodities these days. And if these things were sold at Costco we would have shopping carts full. On Maui where I live there are gas lines at the Costco pumps while other gasoline sellers are empty. And why not? The other stations prices are almost a dollar a gallon higher. But what about the commodities you don't buy a tank at a time?

Remember when gold was all the rage? Five years ago December 2009 gold was 1135ish an ounce. That was already a three fold rise off the lows. From there, just two years later, it went to a new high near 1920. Today it is 1128 an ounce a 40 percent decline. You don't see many “We will buy your gold” commercials on TV like you did back then.

Catching up to gold is crude oil. As 2014 winds down we have seen the price of a barrel of Oil decline 40 percent this year. It was in100 area and today is in the 55 dollar area for a barrel of oil. I saw a headline the other day calling this an oil “GLUT”. I kept looking for the articles that mentioned the recent dinosaur sitings. I mean how can you go from worrying about the low stock piles of oil to an oil glut without dinosaur sitings? Which gets me back to the ABC's of investing.

The ABC's of investing “Always Buy Cheap” is more about when not to buy than a value discussion. Let me explain. People are almost 100 percent emotional. And when it comes to investing they need that crowd pleasing security of something that is constantly talked about and seemingly can only go up. In my opinion that is today's stock market.

The Dow at this writing is above 18000, a new all time high. Almost 250 percent higher than the lows in 2009. Anyone remember the financial crisis? It's as much a distant memory as the dinosaur sitings. But if you had to sell during the crisis you remember it like it was yesterday. Why? Because the Dow and the S and P declined 50 percent in less than 24 months...Now that's a blue light special.

My point to this long treatise is that while we may have reached Nirvana, history tells us probably not. It gets harder to lower interest rates and pump up asset values as you reach zero percent. Eventually you have to have real growth (profits too) to support the debt load. Otherwise markets implode.

At this time of year where we financial types are thinking tax loss selling, I am taking money off the table. Remember what you see in your statement are “UNREALIZED” gains and can evaporate faster than you can analyze the reasons why. Those gains that make you smile today are never cash in your pocket until you go to the cashiers window. Harvesting some (taxable) gains after the 250 percent rally from the 2009 financial crisis lows is what this prudent man would do...Merry Christmas to everyone. May there be peace on earth...Yours Truly...Steve