Easy Street

Easy street can be defined in many ways from financial security to a Charlie Chaplin movie. What concerns me are the bond investors who have benefited from a 28 year  rally not knowing when it will end, driving down an easy street without much risk. August was another depressing month and some investors were scared out of stocks and flocked to safe havens like bonds or gold. The best thing long-term investors can do is to turn off their tv’s and not listen to the talking heads who promote fear in order to sell advertising, so far in September the markets have gains of almost 7%.

I am in the camp that believes stocks look more appealing than bonds and even gold at the moment. Today’s durable goods reports was another sign that the economy is getting stronger and if next Friday’s Jobs report confirms that more unemployed folks are finding jobs, then it is further proof that we are growing, even if its slowly.  One of two things can happen over the next few months….the economy will continue to grow on its own and that will be great news for stocks but possibly bad news for bonds and gold. If the economy doesn’t get better, the Fed has announced it will do whatever it can in order to stimulate the economy, this will be good news for stocks, bonds and most other asset classes. I’m optimistic that stocks are in a no lose situation and bonds may fall on hard times which is why I favor equities over fixed income at the moment. It’s important that investors have the proper mix of asset classes and not take on more risk than they are comfortable with.

Another potential asset to  be concerned about is gold, whose primary use is to make jewelry but consumers aren’t buying many luxury items during these uncertain times, so the price has been inflated because of currency market fears and speculation. How much higher can gold go, nobody knows but remember, just because gold will always have a price to sell at doesn’t mean you should own more than is prudent. The unknown question is at what price will gold be when you do want to sell $300 – $1300 or $2000 an ounce? Gold bugs need to be careful.