August 6, 2007: What to do? Stocks, wild markets, real estate

PICTURE: DO NOT BECOME ONE!

Being an investor for over thirty-five years - and still loving it - I think the first thing to do is something NOT to do. Don't panic.

If you are top heavy in banks,home builders,mortgage companies or investment houses that are top heavy with junk debt. Or, if you are in a hedge fund that gives you insomnia, do the following: cut back 50% on your positions. You have taken a shot to the groin but don't throw in the towel. Most of these securities and funds will bounce back longer term, especially if government gets into the home business to help those that can't afford a home of their own (and who started the sub-prime mess to begin with).

I would place cash into a simple fund: GE InterestPlus which yields 5.43% on a layered interest scheme. www.geinterestplus.com

I would also use the security lists I have generated on the past several posts to find individual stocks that will fit well into your diversified portfolio.

And, I would look long and hard at purchasing existing homes as an investment. New spec homes that are sitting vacant also represent great long term value. I have never seen a better buyer's market for residential and multi-family housing in many areas of the country than now. Make low ball offers through a Realtor who has helped pre-screen properties that fit your criteria. For most novice investors, properties should be less than thirty miles from your home.

When buying (unless I really see a property I want that is dirt cheap), I generally make offers on fifteen homes and have the sellers eliminate themselves by their actions. Generally, one or two have to sell. Or, pass and try again later on the same or different homes. The principle is simple, buy at the lowest price from an individual that has to sell.And you will know which ones have to sell be seeing how low they go.Some owners become hostile - they are toxic and cannot take emotion out of their business procedure of selling the property. I find the latter amusing.

Recently I bought single family homes in Southport, NC. On day one, I made offers on twelve homes at 8 a.m. through a Realtor (I am licensed in other states and found a Realtor with excellent sources of information about growth plans for the area - a great help).By noon we were down to five. At 4:45 p.m. we were down to two. I selected one for purchase (the other thought for sure I was going to meet his terms and would not budge). At 5:15 the one owner I had not selected called and asked when we could close on the home. I said sorry,but I'll see you in two months when your home will still likely be on the market.Compressed negotiations are a great idea once you acquire real estate experience and the ability to look at each purchase as a business, not emotional decision. The same business mindset should be in place for securities.

Do not fall prey to media swirl, ego-satiated blog professionals or be paralyzed. Have confidence in your ability to stick with almost all of your core holdings and begin to add a few defensive stocks and wisely purchased real estate to your portfolio. Over the long term, you will do just fine.

PS -- I really enjoyed endorsing all the rent checks this week. This repetitive name signing beats just about all double shorts and day traders out there!