Market strategist urges investors to stick to their guns

Solid investment principles, not tenuous market predictions, will ultimately prevail over the economic recession, according to Edward Jones Chief Market Strategist Alan Skrainka.

Skrainka spoke to about 200 clients of the financial advising firm at Genoa Lakes on Friday. He advised them to "stay focused on the things you can control."

"A lot of stuff going on makes us angry and fearful," he said. "There's anger over the bailout of GM, but there was no vote - we can't control it. We can control our own emotions. Panic is not a very effective investment strategy. The best way to survive any crisis is to stay calm, have a plan and stick to it. Panic is not a plan."

Skrainka said there are three principles investors can control: the quality of their investments, extent of their diversification, and how long they own their investments.

"My dad once thumped me on the chest and said the reason we always talk about diversification is because we don't know what is going to happen," Skrainka said. "He was right. That's why we diversify."

Skrainka said watching so-called experts on television is like watching doctors fight over what cure will make a patient better.

"That's what our industry looks like to most people," he said.

But Skrainka said the talking heads will never draw the bigger picture, like the fact that the U.S. economy has been growing 86 percent of the time since 1957, and 95 percent of the time since 1982.

He said in the current recession, after taxes are taken into account, Americans are still producing roughly $10 trillion of disposable income.

"In the Great Depression, the economy shrank 30 percent. Unemployment was at 25 percent," he said.

In contrast, the current economy has contracted by 6 percent during its worst quarters, he said, while unemployment has hovered around 10 percent.

"It could stack up being the mother of all recessions," he said. "It's bad, but it's not a depression, not even close."

Skrainka said the four steepest recessions since World War II produced the four strongest recoveries.

"Good performance often follows bad," he said.

He said indicators of a recovery are on the horizon, including the slowing of job loss and the resurgence of the stock market. The issue, he said, is sticking it out, allowing for enough time to regain and grow diminished investments.

Skrainka said there are three types of investors during a recession: those who sell, those who stick, and those who buy more shares. He said he belongs to the latter group - those who take advantage of low prices and reinvest whatever returns they receive into more shares.

"The biggest lie is that your job as an investor is to figure out the first day the recession starts and the last day it ends," he said. "It's frustrating for us trying to get people to avoid pouring investments in at the top and taking them out at the bottom."

When asked about the growing federal deficit, government bailouts, the fluctuating dollar and potential inflation, Skrainka said the U.S. is not likely destined for disaster.

"If we keep stimulus up and don't pull back when the economy recovers, we could see higher inflation," he said. "I don't think we are destined for disaster. We have a lot of debt, and we do need to get spending under control."

But he pointed to the U.S. bond market, which is still 10 times greater than the U.K.'s and 100 times greater than Japan's.

"The dollar always fluctuates," he said. "It's gone up 20 percent since the crisis."

In regards to the politically unpopular bailouts, Skrainka compared the rescued irresponsible bankers to those who smoke in bed.

"The way to punish them is to not call the fire department when their house burns down," he said.

But at some point, he said, intervention is needed "so the neighborhood won't burn."

"I do think we are starting to come out of this," he said.

Though challenges lie ahead, Skrainka urged investors to take "responsibility for your own investments and your own future."