Share this
Twitter
Myspace
Digg
Del.icio.us
Reddit
Slashdot
Furl
Yahoo
Technorati
Newsvine
Facebook
Export PDF
Print
E-mail
TagsBY WARREN BOROSON
NEWJERSEYNEWSROOM.COM
Things don't look good.
We're not going to have a brisk V-shaped rebound, the kind we've had in the past. "And there are no prospects for a V," said Eric Weisman, fixed-income portfolio manager at MFS Investment Management at its recent year-end conference.
Trouble is, Weisman said, we have high unemployment, yet companies are doing fine without more workers. We have excess capacity, and it will take years to work off. So we'll have slow growth for several more years – if we're lucky. Otherwise, things may get even worse.
A bright spot: U.S. corporations are sitting on an enormous pile of money – levels of cash unseen since 1955. They can use the money in five ways, said James Swanson, MFS chief investment strategist: to buy back shares, pay or increase dividends, engage in mergers and acquisitions, make capital expenditures, or hire more workers. The first three would benefit investors, the last two would help the economy.
But even in a slow growth environment, said Swanson, U.S. stocks may do well – because so many U.S. companies invest in foreign companies. Some 40 percent of their revenues now come from abroad. The best situated may be those with exposure to emerging markets.Where to invest? Large, dividend-paying companies, Swanson suggested. In particular, utilities – one reason being that the usage of electricity in this country continues to increase. As for technology, it's one of the few remaining manufactured products that the world still wants from our country. Our technology stocks are cheap compared to their prices during the late 1990s bubble, Swanson went on, and there are multiple product revolutions going on.
Joseph Flaherty, chief investment risk officer, made a strong case for diversification and for rebalancing – bringing your portfolio's asset allocation back to where it was.
He looked at a 20-year period, 1990-2010, with a portfolio 50 percent in stocks and 50 percent in bonds. After ten years, without rebalancing, the portfolio was over 70 percent in stocks – just when the tech wreck hit.
What would have happened over those 20 years if (1) you had invested $1,000 a year in the best-performing stocks, (2) $1,000 in the worst, (3) put equal amounts in all sectors every year but not rebalanced, or (4) put equal amounts in all sectors every year – but rebalanced?
The best performer: the last. And with the least volatility.
Flaherty then quoted economist Harry Markowitz as saying that the only free lunch is diversification.
