Investor Confidence Crumbles

Is just investor confidence crumbling or is the economy crumbling too?

By Jim Van Meerten May 21, 2010 11:00AM
" Investor Confidence Crumbles" was the headline on my morning read in the Financial Times this morning. My first thought was: Is just confidence down? What about the economy?

My yardstick for measuring the economy is the monthly report for the
Conference Board's Leading Economic Index published just yesterday. Now comes the bad news. The Index has been positive every month since October 2009. This was the first month that Index reversed itself. The following components were negative, beginning with the largest:
  • Building permits
  • Supplier deliveries (vendor performance)
  • Real money supply
  • Average weekly initial claims for unemployment insurance ( inverted)
  • Index of consumer expectations
  • Manufacturer's orders for consumer goods and materials

My own blog site is called Financial Tides. I chose the name from what I learned when I received my American Red Cross Junior Life Saving Badge at age 14. When you are caught in a rip tide or in an inlet and get caught in an outgoing tide you must swim with the tide to survive. If you try to swim against the tide you will drown. You should first swim with the tide then swim sideways to get yourself out.

 

Maybe now you should do the same thing with your portfolio. Trim losing stocks quickly. Don't replace them immediately till you feel the tide has changed. Now is not the time to swim against the tide. You just might drown.

 

Both the stock market and the economy are in retreat and traveling in the same negative direction. Next month if both the economy and the market are in the same direction 2 months in a row I'll decide what to do.

 

Right now, I'm swimming sideways and taking myself out of this rip tide. How about you?

 

Jim Van Meerten is an investor who writes about financial matters here and on Seeking Alpha and Financial Tides. Please leave a comment below or email JimVanMeerten@gmail.com

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