My 2009 due diligence list

The retail news isn’t pretty this morning after Christmas. Consumers played a game of chicken with the retailers during the Christmas buying season — and the retailers lost big. Afraid of getting stuck with too much merchandise during low traffic trends, the stores marked down prices in many cases some 60 to 70 percent before Christmas — but consumers who are worried about the economy and their jobs, still didn’t part with their dollars freely. According to CNBC, retailers saw a decrease from one to eight percent this year. Even online saw a decline. Gift cards even took a hit. And stores expect to see a higher rate of returns than normal.
So, with the ringing-in of 2009 just a week away, it’s time to “take stock of our stocks.”
At the risk of sounding like that obnoxious kid on the playground going “nah-nah nah-nah-nah” as I know many took major hits in your 401ks and individual stocks during 2008 — I’m very happy — and grateful — that I didn’t take any losses and finished ahead of the game.
Because, in the end, that’s what the market really is — an adult game of Risk.
With one significant difference. In the real world we can hedge our risks by doing our homework, watching the trends, reading the news and placing our stock bets very wisely.
But just as the Kenny Rogers song goes, you need to know when to hold ’em, know when to fold ’em and know when to walk away and count your money.
No matter how many columns I’ve written over the past year warning people that this is not their daddy’s market anymore — and they really need to get over the old-style of investing in which they sock their money into a stock and keep holding on to it all the way down because of some fairytale they heard over the years that made them believe if they keep holding it and wishing long enough — it will magically rebound to highs again — many people just couldn’t force themselves to take a loss and run.
And they got burnt.
In some cases, they were scorched.
Many will likely stay out of the market, or on the sidelines in intensive care, for a very long time.
Meanwhile, those like myself, who jumped onto the sidelines early in the game in 2008, are now starting to smack our lips at some great bargains awaiting us in 2009.
I don’t say this to rub salt into any wounds, but rather, many who got badly damaged, will likely miss the turnaround my best guesstimate believes will start coming around the end of the second quarter of 2009.
That doesn’t mean I’m about to run full-thottle into the market — it just means my due diligence on the market never stops –so when I see a good bargain, I’m always going to be in the market to make some profit on my money.
So starting off 2009 I’m turning away from financial stocks, until we have a clearer picture of how they will be restructuring.
Instead, I’m eying companies like McDonald’s, Dollar Tree and Wal-mart, which I’m guessing will be the type of places cash-strapped consumers in 2009 will be turning to more and more, if only for the essentials and the occasional Happy Meal.
But if you got beaten-up in 2008, then don’t feel bad about being on bed rest for awhile, as I’d rather see you lick your wounds and take time to recover, than risk jumping back into the ring too early in the game and taking another beating.
Just remember the usual disclaimer: Don’t base any of your investment decisions on anything you read here. Do your own due diligence, or at least enough research to hire the right professional to do it for you.

One Response

  1. Cathleen,

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