|Bob Irish Reporting: Delray Beach, FL. Friday December 18, 2009|
Al was more excited than usual last night when I met him and his wife for dinner at a local pizza place in Delray Beach.
"I can't wait for tomorrow," he said.
"Why is that?"
"I'm buying a multi-family apartment building."
"Cool. What made you pull the trigger?"
"It's time, that's all."
"You think, the market has bottomed?"
"Oh, I don't know about that. I simply look for properties that can wash their own face."
"A property can wash its own face if the rental income covers the mortgage, taxes and insurance."
"Okay. I get it. And if real estate dives again?"
"No sweat, I'll be holding onto this property for 2-3 years at least. And, as I said before, it can wash its own face. So I'm not worried about that."
Should You Worry About a Bad 2010?
Al isn't impulsive and he's not a big risk-taker. I'd call him a non-adventurous opportunist. He has a good head on his shoulders. And a nose for opportunities that make him money in the long term.
I wish more investors were like Al, taking the long view.
Most don't, because they have trouble separating their emotions from their investing decisions.
This past year, fear dominated. Even as the markets trended up, there was no mad rush into stocks. Apparently, many investors don't know what if feels like to buy low.
They've been gun-shy and willing to invest only selectively and only in the safest securities.
Here at IDE, we think that's a good thing. The overall market is no longer a bargain. However, some stocks are still priced to buy.
Mr. Market can act in mysterious ways. Over the last half year, it's rewarded speculative small companies much more than the bigger and deep-pocketed companies. As a result, many blue chippers are relative bargains.
As scared investors gradually gain more confidence in the stock market, these companies should attract the lion's share of investment dollars. Even if 2010 turns out to be an economic bummer, blue chips should still do well because of...
Do You Believe in China?
All you need to know is that BHP Billiton believes in China. That's better than getting two dozen so-called "official" numbers from the government indicating that China's robust growth is continuing.
BHP is the giant mining company hailing from Australia. Its in-house knowledge of China is better than the CIA's. I'm serious. BHP has more people in China than the CIA. And it has far more people following China.
BHP has good reason to keep close tabs on China. It sells them more than $10 billion worth of rocks (from coal to diamonds). How China goes, so goes BHP.
BHP recently reported that it expects global steel demand – led by China – to double in the next 15 years. That's a long-term trend that even "Man of the Year" Bernanke can't sabotage. If steel is going up, so are the other industrial metals (like iron ore, copper, and nickel) in the long run.
So what if China's recovery is coming from all the "lending and spending" its government is doing. China can afford it. Look at it this way. They're spending the hundreds of billions of dollars we pay them for their products to prop up their economy. Nice arrangement there.
Other Long-Term Trends
Apart from China, here are two other long-term trends to keep an eye on...
IDE's Ted Peroulakis took a hard look at Washington's latest spending package... its trillion-dollar-plus new health care plan. And he says it'll be a boon for hospital operators. "Additional revenues will come from an extra 30 million Americans getting health insurance coverage. Currently, hospitals take billions in losses every year due to uninsured patients not paying their bills after they receive care. Hospitals will get a significant boost in revenue if millions more Americans are insured."
By the way, Ted made a 38% gain in less than a week with an option on a health care stock. If you're interested in Ted's Options Power Trader, click here.
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