“You have stated several times in the past year that you believe the US is in for a significant and sustained recession. You have also said that, in spite of your expectation of an extended bear market, you are keeping most of your stock portfolio intact – i.e., you are not selling. Why not? Are you suggesting that everyone hold?” – JP

My Response: I don’t tell people what to do with their investments because I don’t think of myself as an investment advisor. What I do is write about decisions I’ve made for myself. As I’ve explained many times, my portfolio is made up of what I call “Legacy” stocks – companies that have the size and strength to endure through recessions and even depressions. So, even though I think there’s a good chance that we’re in for an extended bear market, I’m not selling.

As I pointed out in the Sept. 27 issue, if I had another sort of stock portfolio – one that was heavy in speculative and/or growth stocks – I would make a change. Likewise, if I were making money trading stocks, I’d stop and wait till the smoke clears.

But that’s not the position I’m in. I can afford to wait a year or even five or 10 years for the market to recover… which it always has. As TS, reminded me recently:

“The S&P 500 has been down 20% or more over a six-month period eight times since World War II. The first six months of this year were the latest example. Every time this has happened in the past, the market was positive for the next six months with an average return of 21.5%.

“Furthermore, in all seven previous times, the market was positive for the following 12 months with an average return of 31.4%.”