Good Advice for Hard Times from a Realistic Investment Manager

[Mike03]

For what it's worth, I finally heard what I consider to be intelligent advice about how to (try to) navigate this very difficult financial period. The advice comes from Nick Russo, who runs Russ Trading in Phoenix, AZ. He used to have talk program on a local station here. His message has not changed since 2003 when I first heard his program. Russo is a bit of a egotist, but I don't think it obviates the fundamental wisdom of what he's saying. What he has to say sounds somewhat ruthless and dire, and it may disappoint folks who think there is something that the Fed, IMF, World Bank or our government can do about this, but here it is:

1. Stop Spending any money that you don't have to spend.
2. Start saving all the money you can.
3. Pay off as much debt as humanly possible.
4. Because health costs are so enormous, and because health is such a fundamental aspect of how we feel during hard times, get as healthy as possible.
5. Accrue cash. (I take it he is speaking to investors here, suggesting that they lighten up on equities and move to currency).
6. Don't anticipate receiving much if any help from the government.

As far as advice to investors, he continues to recommend the same sectors that he always has:

Tangible (hard) assets
Resources that are increasingly scarce
Companies that build, repair and retrofit infrastructure (i.e., sewer, water purification, electrical grid, retrofit coal plants, nuclear, uranium, etc...) Possibly utilities.

This all sounds reasonable to me. But I would be grateful to solitic the opinions of others who disagree or may have better suggestions, or have a good idea he has missed.

[WCGreen]

1. Public works projects are always a way to get something done and

inject much needed cash into the system...

Infrastucture sectors make a lot of sense to me...

[trof]

2. Natural Resources ETF

OK, shouldn't tout a 'stock' here.
But I doubt it'll get much of a bump from DU.
I've been in it for a couple of years and it has done stunningly well.
Even pays some dividends.

Invested in what are called 'extraction' companies.
Oil, gas, mining, timber/lumber, etc.
I'm just sayin'...
:-)

[Firespirit]

3. If you were recently hired, keep a close eye on your employer

If times get rough, new hires are often the first to go. If things start looking dire, assume the worst and look for another job just in case.

[alfredo]

6. Some employers will try to get rid of us old farts first. We make more

money and are nearing the time to start collecting their pensions.

[Firespirit]

7. True, my dad was let go in the recession of 2001

He was just shy of 50 and apparently if they waited to get rid of him, there could have been an age discrimination lawsuit.

Amended: Watch your employer like a hawk, period.

[alfredo]

9. I was put out on 100% disability. I don't need to watch my

employer anymore.

[lonestarnot]

11. They can fire you for the color of your tie, but they cannot fire you for an unlawful reason.

[alfredo]

12. They can make up any reason just as long as they don't say he was getting

too old, or getting too close to collecting his pension.

[lonestarnot]

13. Actions also count. "sayiing" isn't the whole story.

[alfredo]

14. There's always a risk when you have to argue in front of a jury. Your

secret biases may not be as secret as you think.

[lonestarnot]

26. That should be discovered with smart with the program attorney in voir dire.

[alfredo]

28. That could save a lot of time, money, angst.

[democrank]

4. Thanks, Mike03

K & R

[pitohui]

5. do you understand what inflation is?

because if you did, you would understand the weaknesses in his advice

any dollar you don't spend today will buy less tomorrow, it's that simple -- a penny saved is a penny lost

the $4 cheese you didn't buy in 2001 is now a $20 cheese and how much interest did you earn by instead investing the $4? oh that's right, CDs have been paying a pittance over that time frame and stocks have gone nowhere, so you didn't earn anything -- and now you can't buy the cheese either

"get as healthy" as possible is particularly cruel advice, i was born with the genetics i was born with, and i hope mr. russ roasts in hell, 40 years of pretending that one's health is under one's personal control has resulted in the mess we have -- we need to acknowledge that good health is mostly about winning a lottery and that we need universal health care and anything else is just selling us a bill of goods

sometimes there ISN'T an individual solution for a collective, political problem and pretending there is and that we can all bootstrap it is just cruel

[Xenotime]

10. Thank you for saying this. I was going to point out the weaknesses but you did it.

[Individualist]

15. "get as healthy as possible" is not only cruel, it's absurd.

Someone should ask the guy to tell us his secret for controlling genetics. :crazy:

I agree with you about the rest of his advice as well.

[trof]

25. 'Adam Smith': Invest in tuna fish.

George Goodman, better known as Adam Smith, wrote about investing in tuna fish during times of high inflation.

He said one of the best practical investments he knew of was to buy a few cases of tuna fish and stash it under the bed. Especially if you like tuna fish.
Since the price of a can of tuna you but next week will probably be higher than the one you buy today, you're locking in your tuna prices for the foreseeable future. And maybe get a volume discount to boot.
Simple, but sound.

[On the Road]

8. All Good Advice

He doesn't recommend gold, either, which has does well during crises but is volatile and has not proven to be a good long-term investment.

There's also the old saw my mother told me "have more than one way to make a living."

[ProdigalJunkMail]

16. great advice for any time...

bar the bit on accruing cash (which in some times is great and not so good at others)...

sP

[Lorien]

17. Something I keep wondering about; if inflation is supposed to skyrocket

and the value of the dollar continues to drop, then wouldn't the debt you have now be worth less in the future? (Assuming your salary can keep pace with inflation).

[ProdigalJunkMail]

18. that is one HUGE assumption

your debt would be worth less...but that salary has to keep up with inflation or you can't even afford the basics let alone pay off your debt!

if your salary can keep up...you win!

sP

[magellan]

19. Exactly. The Mogambo Guru had a good rant about this yesterday

Mind you I don't agree with the Great Mogambo Guru (GMG) on everything; he's a solid libertarian. But his perspective on what BushCo and the Repubs are doing to the economy has been dead on for the two years I've been reading him. (In fact anyone not in thrall to the RW has seen their devastating economic/monetary policies for what they really are, for years. But I digress.)

Here he is in all his glory:

A reader of Agora Financial's 5-Minute Forecast wrote, "You spend a lot of time talking about the loss of purchasing power of the dollar - and rightly so. Therefore, I fail to see the problem with anyone spending dollars as quickly as possible and incurring debt. That dollar spent today will be worth less, if not worthless, tomorrow, and the dollar repaid will be of lower value than the dollar borrowed. Can't have the argument both ways."

I was hoping that someone would ask me to field that question, as I was really champing at the bit at the sight of a potential target for a test-drive of Random Mogambo Attack Mode (RMAM), where I take strange, unnatural delight in punishing stupidity by being rude, sarcastic, insulting, arrogant, argumentative and truly hateful, as is implied by the words "Attack Mode".

And my reply would have been a real bargain, too, as it was a "two-fer"; not only would I have rebutted the argument, but I would have also been entertaining in a horrifying, embarrassing way, for no extra charge! Free!

For those who wish to hear my entire reply, I have handily expurgated the screaming obscenities, malicious lies, various libels, incoherent words and phrases, personal attacks and random death threats, and now the entire 50-page essay is boiled down to just the paragraph, "If you can guarantee that you will have an income that will rise faster than inflation, interest and taxes for the rest of your future life as your debt rises for the rest of your future life, then you are right; borrow as much as you want and party down, dude! You will, indeed, be paying back with cheaper dollars, handing yourself a bargain in the process, which is no problem for you because you are so smart and important that your employer will no doubt be happy - happy! - to pay you more and more wages and benefits at a rate that is actually higher than inflation in prices and taxes, for all the rest of your life! Lucky you!

http://www.dailyreckoning.com/Writers/Mogambo/DREssays/MG031708.html

[SoCalDem]

21. The problem is this.. debt is still debt

and it makes you less flexible..Job losses come with downturns, and too much debt makes you vulnerable to losing everything if you suddenly lose a job and cannot pay..

the ones who have financial liquidity can afford to borrow now and pay back with cheap dollars....but if you count on a paycheck from someone else, you are not "there"..

all you get from borrowing, is more debt, and a bunch of stuff you might have to figure out how to move if you ended up losing your house..

and as the dollar gets "cheaper", things just cost more, so it's all pretty much a wash..:(

[Lorien]

22. Oh, I'm no fan of living with debt! I don't even have a credit card

and I'm certainly not encouraging anyone to spend like a fool to rack up MORE debt. But never the less I am over 30k in debt due to medical bills. It's all on a home equity line (I have about 350k in equity in my home). I never carried any debt at all until I needed a surgery that my insurance refused to cover-save for my mortgage. I don't even have a car payment. I do expect my income to increase slightly in the coming year-but I don't know if putting every dime I have into paying off the medical debt would be as wise as, say, getting the additional medical procedures I need done NOW while I have a prayer of affording them. If I wait too many years my health issues could become much bigger. It's more debt now or.....?????

[SoCalDem]

23. If it comes down you your health..debt or no debt, that's the main issue

to tend to.. :hug:

[katty]

20. all good and especially pt#6-NEVER expect to get help fr gov

[Lorien]

24. Unless you are a Wall Street banker or corporate CEO. n/t

[girl gone mad]

27. I think this is solid advice.

I wish I could have rec'd within the 24 hour limit.

I especially agree with his advice to invest in tangible assets. My business involves buying and selling a scarce product and our domestic demand has remained solid, while our international demand has grown in concert with the declining dollar.