Welcome to The Zen Investor                 September, 2010


Let's start with the conclusion - things are not nearly as bad as the mainstream media would have you believe.  That's not to say that things are rosy, because they're not.  But fear and loathing are rampant in America, especially when it comes to our economic future.  We are far less pessimistic than the average bear, and we have the economic statistics to back up our view.  For details on our current view of the markets, click the MARKETS tab on the main menu above.

The U.S. stock market found a bottom in early July, and has since been trying to move higher.  But because of the continuing weakness in the housing and employment numbers, these rallies have been weak and short-lived.  We're now in the midst of another attempt to break through the ceiling of 1,115 on the S&P 500, and it's far from certain that the bulls will succeed.  The good news is that, even if they fail to break through that barrier, the downside appears to be limited to 1025-1040.  At that level, there appears to be enough "value" buyers to support the market.

The employment report that was published on Friday was tepid.  That could be good news or bad news, depending on what your expectations were.  For the bears, and the more pessimistic consumers of mainstream news, the report provided further evidence of a declining economy.  For the bulls, and the more optimistic consumers of the actual data, the news was more positive.  The private sector continues to add jobs, but not fast enough to keep the unemployment rate from rising.

The housing numbers were mixed, but with a slightly positive bias.  And further evidence of a rebound in housing can be found in the behavior of housing-related stocks, which have refused to go down even when the numbers are bad.

The question on everyone's mind seems to be, will the economic recovery fail, and are we going to get the dreaded 'double dip' recession?  Our answer is that the recovery is struggling and stumbling a little, and the risk of a double dip  has increased.  But it has only increased a little - from a 15% to a 25% probability. It's much more likely that the recovery will continue, but growth will be slower than expected.  

For more details about what's happening in the economy, click on the  ECONOMY tab on the main menu.


Careful With That Ax, Eugene...

When the market is going down, and the news is mostly negative, there's a natural human tendency to protect the nest egg by getting out of stocks.  We think that would be a mistake.  The thing we pay closest attention to is the business cycle, because stock prices will always reflect what's going on in the world of business.  There are many times when stock prices get out of sync with the business cycle, but eventually their relationship is restored.  Right now investors are worried about what might happen in the future, and stock prices are going down in anticipation of a double-dip recession.  But the evidence we see in the hard numbers doesn't support this pessimistic view.  There are plenty of problems and concerns, to be sure, but so far none of them are serious enough to cause the economy to slip back into recession.  Our model portfolios reflect this view, by maintaining a steady but slightly reduced exposure to stocks.


The Model Portfolios                      

The essence of our work is found in our model portfolios.  This is where we show you how to move from theory to practice.  We use three models:  Conservative, Moderately Aggressive, and Very Aggressive.  For a more detailed description of how the models work, see our MODEL PORTFOLIOS.


What To Do Next

If you are interested in learning more about how The Zen Investor can help you to think and invest for yourself, we invite you to explore our content using the navigation buttons at the top of this page.  For information about what's going on in the Economy and the Markets today, click on those buttons.  For background information on how we arrive at the conclusions we use in our model portfolios, click on Beliefs and Articles, and browse through this information.  And if you are interested in going further, click on the SERVICES button to find out what we have to offer to our subscribers.