“In the last twelve years, there have been two wars, two recessions and the market has gone down 50% twice,” Sr. Vice President Carl Platou of American Funds told investors in Colville, WA., who were dining on one of Lori Robert’s fine lunches with several meat selections and sides.
We dined and heard market trends and issues, several encouraging, but as Mr. Platou said, “No one knows what Congress will do about the expiring laws for qualified dividends in January 2013, now at 15 percent. In the l960’s these were taxed at 70 percent. His company suggests including qualified tax-exempt dividend stocks in IRA accounts.
“People are no different than buffalo,” he said and pointed to an illustration of Native Americans hunting buffalo by fooling them to jump off cliffs, a safer and faster way to hunt than going eye-ball to eye-ball with a bow and arrow than the speeding buffalo. “Humans have the uncanny instinct to herd, too. Twelve years ago it was investing in technology. Today, although it’s gold and bonds, it is imperative to invest in dividend-paying companies. We foresee the trend for companies to increase theirs.”
Major trends: “In ten years the U.S. will no longer need to import oil.” He pointed to the new oil discoveries in the U.S., the use of LNG gas, and the fact that four new chemical plants are now being in the U.S. Fuel efficient 4 and 3 cylinder engines are on the horizon.
In agriculture, “More nations want to eat better. Eighty percent more apples have been exported this year by Wenatchee growers and this has an impact all the way through the food-distribution system in increased sales of seeds, fertilizer, farm equipment.
“People around the world want better health care. One of the largest suppliers of insulin is offering a new, less painful product for diabetes which helps weight loss. Diabetes does not have recessions.
“The big housing issues, where many mortgages are under water and need to be righted, the cost of money is cheap and it’s an opportune time to buy up these houses now during the lowest creation of new homes in our lifetime. Interest rates should remain low for some time.”
“The threat of inflation is real. Costs are going up particularly in education, health care, food and fuel.
One woman said, “I’d rather be optimistic than pessimistic. It takes the same kind of energy.”
For me, the foremost investment philosophy is NOT to lose money Trends and issues ARE important. These matter. I must be a pessimist. Are we are heading over a financial cliff, just like buffalo?