I am retired and take educated guesses on all things financial.

February 23, 2008

February 25, 2008: ETFs: Chaos, Hysteria and Journalistic Pandering

The economy and other "drive-by" journalist targets. Me worry? No. And you shouldn't, either.

"Drive-by" pundits and commentators are defined as such because they are akin to the classic gangster hits of the 1920's. Jump in a black Cadillac with their machine guns. Drive full speed ahead to their target, usually in a public place. Fire at random, killing their victim and innocents alike without remorse. Then, they gleefully speed off to their next quick hit. Much like gangsters, our economic commentators, some skilled and others talking heads trying to gain audience share go from target to target blasting away. Forget accuracy. Forget opinion disguised as hard news. Forget qualifications. Forget the flow of history. Forget proportion. Forget integrity. But always, remember ego, sound bites and which master needs to be served.

A headline in this weekend was "Coming Week:Horror Show". This piece started with the teaser sentence "The large batch of economic data due out next week reads like a lineup for the soundtrack of a horror show for financial markets".

Panic! Falling home sales. Inflation. Manufacturing slowdown. Flagging economic growth. Job losses. A drop in consumer spending. "All these tunes will play over a drumbeat of retail earnings reports, where the outlook is not upbeat." And this, mind you, was a Market Feature article. The author did not appear to be anyone who has witnessed more than two presidential cycles in adulthood. But, it is The and this piece will be respected.

In fairness, there are an almost equal number of Pollyanna's that see nothing ahead but the golden brick road.

I believe that investors would do themselves and their portfolios a favor by virtually ignoring opines of every sort and focus on the obvious. Treat all financial-oriented media (such as this post) as entertainment and not as Blibical Truth for a portfolio.

Rule number one: Don't fret over situations you cannot change.

Rule number two: Almost nothing turns out as expected.

Rule number three: Never whipsaw oneself out of a long term, conservative investment strategy. And the investment strategy should include more than securities.

Rule number four: Speculate intelligently using hard facts, using only money you can afford to lose.

Regardless of the cyclical nature of the economy worldwide, the investor need only focus on a portfolio consisting of things people need in their lives (energy, food, shelter, labor saving devices and the means to protect them). Companies and sectors for speculation should be those who can produce goods and/or services at the lowest cost, are insulated from hordes of lawsuits and are best of breed in their field nationally and, preferably, internationally. Interest and dividends are important, and should not be neglected. ETF's can handle literally all the needs necessary for long term portfolio success.

Diversification is in the eye of the beholder. John Bogle has an index view. Warren Buffet has a value view. Donald Trump has a put your eggs in one basket and do it better than anyone else view. They are all correct from the standpoint that they have discovered what style works best for them. You, as an independent investor, need to discover what style works best for you and master it.

For sure, no successful investor runs from a business channel to a web commentator to a research site to a brokerage and speculate, trade and flip securities with abandon.

That is stupid. And so are the endless comments and media bilge telling you what to think, without regard to your personal financial health.

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