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Thoughts on hope, change and bears

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By Linda Norman

No matter what political party is in power, the inauguration of a new president never ceases to move me. The inauguration of Barack Obama was no exception. As I watched the historic moment I couldn’t help but feel proud that as a country we have come so far, and yes, I felt inspired by the pervasive mood of hope and optimism. We do not have to agree with one another ideologically to be united in our desire for a better future.

No doubt about it, these are rough economic times and some say it will get worse before it gets better. Our new president will have his work cut out for him.

For investors, every day brings new shocks. The banks are still vomiting up toxic assets and another scam artist in the mold of Bernie Madoff seems to surface daily. Even a patient person with a long-term investment strategy may have felt a little off balance lately, waiting for the next shoe to fall.

Bear markets eat away at your wealth, play havoc with your carefully conceived plans, and for some, prevent a good night’s sleep. It is tempting to cut and run for cover, yet history tells us that this is probably the opposite of what one should do.

I can’t say it any better than Warren Buffet who wrote in the New York Times on Oct. 17, 2008:

“Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

“You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.”

True, there is no one indicator that will tell us when the bear is finally over and the bull has returned. In general, there are three stages of a bear market.

The first is when a few people realize that despite the prevailing bullishness, things won’t always be rosy. Stage two happens when most people recognize that things are deteriorating.

In the final stage, virtually everyone is convinced that things can only get worse. This stage is characterized by fear and panic and a sense that this time is different from every other time.

The tendency to hibernate during a bear market may be strong but I urge you to resist. This is a time for discipline and self-control and yes, hope for better times ahead. It is also a good time to plan future investments and to update your overall financial plan.

Stock markets bottom while economic recessions get worse. We appear to be in the bottoming process now which would point to better times ahead.

Typically, the strongest gains in stocks happen in the very beginning of a new bull market. Those who have left the market in a panic will miss out on those gains.

As always, it is a good idea to consult your own financial adviser for recommendations that are suitable for your own unique circumstances.

Linda Norman is a Certified Financial Planner affiliated with Raymond James Financial Services Inc, member FINRA/SIPC. Formerly located on the 200 Corridor, her office has moved to Deerwood II office complex in Ocala. She can be reached at 629-9138, e-mail Linda.Norman@raymondjames.com or www.raymondjames.com/practicalplanner.