Chapter 5 - What to Do With Your Cash

Where to Put Your Cash Now

Given the extremely low interest rates on money market funds and TIPS (Treasury Inflation Protected Securities), figuring out where to put your cash now is not an easy issue.

Clearly, the most safety and protection from the Aftershock comes from money market funds and TIPS, but for the next few months at least, we see the risk reward ratio of longer term bonds appealing. Longer term bonds, as we said in Aftershock, will be hurt very badly, but in the next 3 - 6 months, they look attractive.

We would suggest looking at 3 - 5 year bond funds. However, keep your finger on the trigger. Interest rates could rise significantly in the next 6 months. Because the timing of moving from longer term to shorter term cash is very important and can change quickly, we recommend you take a look at our money management division, Absolute Investment Management, for managing your cash.  We only work on a managed account basis which means you have 100% transparency into your account and how we are managing it on a daily basis. For more information, call Mike Lebowitz at 301-907-6794 or go to the website www.absolute-im.com.

When to Sell Stocks

The mini-bubble in the stock market has had its first major setback with the European sovereign debt crisis. But, as in the US, a massive trillion dollar European and US governmental bailout timed quite specifically to boost and calm the worlds stock market has succeeded in greatly reducing the losses. The rally could continue for a while, maybe even reaching earlier highs.

However, we see that a certain level of fundamental confidence in the market has been lost. It certainly hasn't been performing in a way that would encourage individual investors, who were tentatively re-entering the market, to re-enter the market in a big way. It also exposed a huge lack of conviction among professional traders in this market and further exposed the problems with the light volume the markets have been experiencing for months--When the markets went bad there were almost no buyers.

Overall, we maintain our earlier advice. You should continue to reduce your stock market holdings a little bit at a time. Given what just happened, you may want to increase the speed of that liquidation. Again, no need to panic, but a measured move out of the market is the right thing to do. This market could easily go higher, but it is likely we are near the top and it is hard to time such sales perfectly.

It may be worthwhile getting closer advice on how to manage your stock portfolio from our money management division. We only work on a managed account basis which means you have 100% transparency into your account and how we are managing it on a daily basis. For more information, call Mike Lebowitz at 301-907-6794 or go to the website www.absolute-im.com.

What to do With Your Real Estate

As we said in the book, no need to sell your primary home. However, if you have a second home that you can part with, we would suggest putting it on the market and trying to sell it over the next 6 - 12 months. No need to panic, but it is worth trying to sell at a reasonable price and moving that into cash and, possibly, gold, depending on when you actually sell the house. Real estate may see a lightly short term bounce and its worth trying to catch it. Long term it will go down, especially when interest rates begin to kick up. Many of the people we work with have already put their second homes on the market to catch the current upturn in interest in real estate, even if that upturn is relatively small. Certainly, there are no long term gains to be made by holding the real estate.