The World is NOT Coming to an End

The reason for the title, is because if you watch MSNBC, you would think that your RRSP's are going down the toilet and you will be working until 85 yrs old. That might happen if you have all your money in high risk hedge funds, or financial derivatives that even Eienstien would have a hard time deciphering what they are.

All that is happening now, is that the U.S. markets are starting to sober up from too much money lent out to people who could not afford their houses that they had purchased. Most of these borrowers did not have too show any income statements or pay stubs and were given low teaser rates to entice them into buying. Both the lenders and the borrowers got greedy, and now the chickens have come home to roost.

But lets take a broader look. Interest rates are still very low globally, the Central Banks are pumping billions of dollars into the financial markets, unemployment is low and the U.S. Dow has gone up 2000 point in the last two years and has given back only 900 of those point. As a matter of fact, the Dow Average is still UP for the year!!!

Large blue chips stocks like GE, Microsoft and Coca Cola have huge sums of cash and no one has stopped buying there bonds. Its the U.S. mortgage industry that is taking the hit, sure it will have broader implications for the world economy, but its impact will be less severe than in years past. Is there a chance of a recession?

Other economies likw China and India are still growing, and most U.S. corporate firms are benefitting tremendously from that growth and a cheaper U.S. dollar.

Is there a credit crunch in the U.S. markets? No, but there is a tightening, which is a good thing. Yes, some corporate bind deals have been postponed, but they will come back. Why? Because markets need to lend money in order to run efficiently and to make money. Corrections are normal and healthy, even harsh ones.Its like a cleansing and only the good ones survive and their share prices eventually come roaring back.

So what am I buying?I recently just purchased shares in Time Warner (TWX-NYSE) at $20.66 U.S. a share. I bought this compaay because I believe the compnay is worth more than the share price reflects. They have a wonderful cash cow in Time Warner cable, AOL, and golden assests in CNN and in their fim and video libraries. Time is spending $5 billion in buying back their own shares and there is an enormous amount of pressure on Management to get this share price up. Folks, this used to be a $60 stock in the tech boom era, now its around $19. Management has already stated they will spin off the cable assets to shareholders in 5 years. In my estimate, Time Warner's share price will be alot higher in 5 years.

This company is not going to skyrocket anytime soon, but over time and with patience, shareholders will do well. Its a boring stock, has are all my stock holding. Boring makes money, I have enough excitement in my life as a Police Officer, I don't need that in my investments.

Other stocks I like are Budweiser (BUD-NYSE), Coca Cola (KO-NYSE) and Yellow Pages Income Fund (YLO.UN-TSX). I don't own these, but eventually I am hoping too. I only have so much money (sigh). I still like all the other blue chips stocks I recommended before as well. Especially General Electric (GE-NYSE).

If you own good blue chips stocks, this market volatility is a hiccup. If you own crap, start over and buy quality companies. Trading is for gamblers and losers. Investing is for wealth accumulators and winners.