The Little Book of Bull Moves in Bear Markets: How to Keep Your Portfolio Up When the Market is Down

Chapter 4. Of Babies and Bathwater: What to Do with My U.S. Investments

With the Dollar in free fall, holding dollar-denominated cash and bonds, as I said in Chapter 2, puts your wealth in the same free fall, and makes it imperative that you move your dollars into gold, silver, or investments denominated in other currencies. But how about domestic equity investments? Aren't stocks supposed to be inflation proof? Is it necessary to jettison a whole portfolio and replace it with foreign stocks? My unequivocal answer is yes—and no.

The fact is that stocks, unlike cash and bonds, which have intrinsic value, represent ownership of assets—real stuff—and therefore have some value, assuming the issuing company remains viable and there is some kind of market in which the assets can be exchanged for value. Of course, that value will change for better or worse as the economic crisis plays out.

In the final chapter, I share my thoughts on how the global economic drama may unfold and the scenarios I see possible as the United States gets ahold of itself and begins to rebuild. It would be impossible at this point to sketch out an investment plan for domestic equities, although somewhere in the course of events it should become possible to identify undervalued United States companies destined to profit from the revival I'm confident will ultimately occur.

With very few exceptions, I would strongly recommend that knowledgeably selected foreign stocks, many of which are currently cheap because of the ...