

Max Frost column: Own the recovery by investing wisely

4:48 PM, Oct. 27, 2012  |  Comments
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Looks like the prediction a few weeks ago is coming to pass. It had been anticipated that the third quarter had the potential of taking a breather.

For a quick quiz, you may take the following test: The stock market is taking a breather because:

? The four-year cycle?

? Fear of Romney winning the election?

? Fear of Obama winning the election?

? Declining profits for many corporations?

? Markets do not like uncertainties?

? None of the above?

? Or all of the above?

Yes. All. So is the next step to buy the dips? There are many reasons to believe that better times are coming no matter who wins the election, so stay with the program.

Here's a few reasons to think positive thoughts. Let's start with one of the best indicators of recovery: homes being built. As the reports keep coming indicating a rise in new homes month after month, it means workers are being put to work, building materials are being used, and long-term products are being sold to maintain the common household.

Personal products like clothing, cosmetics, vacations, travel of all sorts are expanding.

Not to forget auto sales are picking up and many of those autos are being made right here in our country.

It will be imperative that we bring back to the states the millions of jobs that have disappeared. Then we will have taxpayers again. That will be fun!

As long as many of us have been reluctant to spend, stockpiles of cash have been building not only in the corporate world but also in the personal world. That holding back will disappear sooner than you think. Once it gets started and more and more people are back to work (despite the fact of utilities shutting down), we will be looking forward to how to save for the inflation that relentlessly follows.

As we are more willing to purchase (increasing demand) goods and services of every sort, the more scarce (decreasing supply) the products become and the higher go the prices. Same product for a higher price is inflation. Seems like a nasty word, but it is a hard fact.

The higher the inflation the less value of each dollar. Yes, I will get on the soapbox and begin my monthly rant on how to avoid (not get rich, but stave off deflation of the dollar) and that is to own investments that rise with the rising prices being paid.

Take gasoline for an obvious example: 40 years ago gas cost 20 to 25 cents per gallon and now is near $4 a gallon. Own the energy companies. Houses that used to cost $20,000 now are often $400,000. Own the building materials companies. Suits that cost $35 now cost upwards of $400. Own the cottons and the sheep. Do I make my point?

Oh yes, don't forget to own the silver, gold, copper, aluminum and any other component material needed to make things. Yes and own the manufacturers, too.

How about the owners of the nuclear energy plant laying off 650 workers because they couldn't make enough money? The reason they gave was the price of natural gas was taking away their business. Maybe owning natural gas companies might make you a few bucks. Sure wish the local utility could buy back the plant at a good price. Going to take a lot of money to keep an unused plant like that idle. Make an offer they can't refuse. Give it a go.

The Federal Reserve has kept the interest rates low for a very long time. It can't last much longer, so get to the bank and put some lower payments on that home. You can hardly go wrong. Just don't go overboard and dig into the equity too deeply as that could become a problem in the future. As banks have lots of money around now they're looking for a folks to borrow it. They need the money. Right!

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