Home
In this issue
April 21, 2014

Andrew Silow-Carroll: Passoverkill? Suggestions to make next year's seders even more culturally sensitive

Sara Israelsen Hartley: Seeking the Divine: An ancient connection in a new context

Christine M. Flowers: Priest's execution in Syria should be call to action

Courtnie Erickson: How to help kids accept the poor decisions of others

Lizette Borreli: A Glass Of Milk A Day Keeps Knee Arthritis At Bay

Lizette Borreli: 5 Health Conditions Your Breath Knows Before You Do

The Kosher Gourmet by Betty Rosbottom Coconut Walnut Bars' golden brown morsels are a beautifully balanced delectable delight

April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review

Investors, Are You Ready for the Next Global Crisis?

By James K. Glassman





It's not a question of if, but when, some cataclysm will hit markets. Here are some ways to prepare


JewishWorldReview.com | I sure hope I'm wrong, but the international news increasingly reminds me of the 1930s, when aggression in Europe and Asia went unchecked, trade barriers rose, economies stagnated, and the world slid into another war. What makes this situation dangerous for investors is that the stock market doesn't seem to reflect the potential threats and has been blithely setting new records lately.

If you believe in efficient markets, as I do, then disputing the wisdom of the mass of investors who set prices can be a dicey business. Still, you should be prepared. If a terrible event caused the Dow Jones industrial average to fall by 500 points in a day, what would you do?

First, some history. In a column I wrote six days after the 9/11 attack, I cited a study by Ned Davis Associates on 28 worldwide crises, from the fall of France in 1940 to the bombing of the World Trade Center in 1993. The researchers found that after a global crisis, markets fear the worst and stocks get priced accordingly. But as the dust clears, optimism returns, stocks bounce back to where they were, and the market responds once more to economic signals rather than to geopolitical turmoil.

Consider what happened when Japan bombed Pearl Harbor. On the first trading day after the attack, the Dow fell 2.9%. The broader Standard & Poor's 500-stock index lost 4.1% in December 1941, and over the next four months the index dropped another 14%. But then, as the U.S. vigorously pursued enemies on three continents and ramped up war production, the market began to climb powerfully. From 1942 through 1945, the S&P delivered a total return of 147.5% (or 25.4% annualized).

Much the same pattern prevailed after North Korea invaded South Korea in 1950, after Iraq invaded Kuwait in 1990, and, of course, after 9/11 itself. The Dow closed at 9606 on September 10, 2001, lost 14% in 11 days, returned to its pre-attack level by November 9, and closed the year at 10,022.

Of course, there's no guarantee that stocks will move consistently upward in the longer term after a shock, as they did during World War II. The decade following 9/11 was one of the worst ever for stocks, with the Dow finishing 2009 at roughly where it stood at the end of 2001. The reason for the market's miserable perform­ance, however, wasn't 9/11 but an unrelated financial crisis caused by a bubble in housing prices.


FREE SUBSCRIPTION TO INFLUENTIAL NEWSLETTER

Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". HUNDREDS of columnists and cartoonists regularly appear. Sign up for the daily update. It's free. Just click here.


What I worry about is how investors will respond to the next cataclysm. History teaches us not to panic and, in fact, to seize the opportunity. As I wrote in the aftermath of 9/11: "It is precisely because the world is so uncertain that stocks are a good investment." If investing in stocks entailed no risk, then average annual returns would not be 10%. Instead, returns would be more like those of Treasury bonds--about 5% annualized. Stocks reward us well for taking the risk of becoming owners of businesses.

Still, it is a certainty that another shock is coming. I can't tell you what it will be about or where or when it will occur. But it will happen. Here are suggestions on how to prepare and respond.

Diversify. The first lesson on risk is that you need to own a lot of stocks so that winners can balance losers. My preference is to construct a portfolio that includes at least one mutual fund that owns large-company stocks--either a low-fee actively managed fund such as Dodge & Cox Stock (symbol DODGX), which has beaten the S&P 500 by an average of 1.3 percentage points per year over the past five years (and is a member of the Kiplinger 25), or an index fund that mimics the S&P itself, such as Vanguard 500 Index (VFINX)--plus about 20 stocks from a variety of sectors. Not all stocks fell after 9/11. Coca-Cola (KO), for instance, actually rose 25 cents between its close on September 10, 2001, and its close on the first day the market reopened a week later. Even in a catastrophe, people reach for a soft drink. Shares of defense contractor Raytheon (RTN) rose by more than one-fourth in those seven horrifying days. I like both Coke and Raytheon.

Own bonds. A diversified stock portfolio is not enough. Allocate your assets between stocks and bonds. Because the S&P 500 has returned nearly 19% annualized over the past five years, much more than bonds have earned, stocks now dominate many port­folios, either because of passivity or by design. Make sure the proportion of bonds in your portfolio is what you intend it to be; for a typical 50-year-old, that means about 30%. Bonds, especially Treasuries and securities backed by government agencies, provide the ballast you need in rough seas. When a shock comes, your initial losses will be a lot smaller than with an all-stock portfolio. It's worth remembering that even though the U.S. had been attacked, prices of ten-year Treasuries soared after 9/11 as investors stampeded into the safest securities they could find.

Invest regularly. Buying or selling because you (or I) suspect that the economy is headed for a bad time (or a good one) is the worst way to invest. Instead, invest in good companies, or in mutual funds that own them, and hold on. We can't help being affected emotionally by the events around us, so put your stock purchases on automatic pilot. Set up a plan to invest the same amount every paycheck or every quarter--a technique known as dollar-cost averaging. That way, if shares fall in value, you'll be able to purchase more of them. If you're investing regularly through your 401(k) plan, you're already doing that.

Seek bargains. Although buying stocks regularly is a valuable approach for most people, capitalizing on a market decline is the single best way to lower your risk. So, if you can muster the courage, buy at the worst of times. Think back to how you felt on September 11, 2001. You were only human if you worried that more attacks were ahead and that the tourism, transportation and entertainment industries would be wrecked for years. If you thought about your investment portfolio at all, you were probably kicking yourself for not owning more Treasury bonds and gold. Buying General Electric (GE) after it fell by one-fourth in the two weeks after the attack was the last thing on your mind. But the stock regained all it lost, except for a few cents, within a month.

My advice on preparing for the next shock is based on history. But I must issue a warning, and it's a big one: The future may not be like the past. If you believe that this time will be different, one recourse is to protect yourself by buying a hedge, such as a mutual fund that rises in value when the stock market falls. An example is ProFunds Bear (BRPIX), which seeks returns that are the opposite of the S&P 500's. The problem with bear-market funds is that they tend to charge high fees. Also, because investors lose money when stock prices rise, many lack the discipline to keep buying these hedges in good times (such as now), and that defeats the whole purpose.

The truth is that if you think the world is completely falling apart, you shouldn't be investing anyway. You should be spending--or maybe squirreling away freeze-dried food. In my opinion, it's not going to come to that, but it doesn't hurt to be prepared.

Sign up for the daily JWR update. It's free. Just click here.

Interested in a private Judaic studies instructor — for free? Let us know by clicking here.

James K. Glassman is a Contributing Columnist at Kiplinger's Personal Finance. He is a fellow at the American Enterprise Institute and chairman of the firm Public Affairs Engagement. and owns none of the stocks mentioned.



All contents copyright 2014 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC

Quantcast