Friday, February 27, 2009

Time to Hunker Down

The S & P 500 index closed below its prior intra-day low from November 21, 2008 which was 741.02, finishing the week at 735.09.  I view that development as negative for the future.  It is time to hunker down even more.  I am going to restrict any new buying only to investment grade senior bonds, government bond ETFs both foreign and domestic,  and the ETF LQD which I do not currently own.  This restriction will be in effect until I have more clarity on the potential downside and applies to all accounts including the retirement accounts.   If I make a change in this policy, it would only be to add preferred stocks and junk bonds but those categories are on the prohibited list at least until mid year or later, most likely. 

In all accounts, I will start adding common stocks again only when the S & P 500 index closes the month above 815 and then I will only invest my cash flow until the VIX falls below 20 and stays below 20 for 3 months.   I am now in a capital preservation mode.  

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