Cramer Agrees: Diversify Your Brokerage Risk ~ The Risk Averse Alert

Sunday, July 10, 2011

Cramer Agrees: Diversify Your Brokerage Risk

I strongly disagree with Jim Cramer per the investment strategy he advocates in the video clip below. With systemic risk extraordinarily high, ROI is not the proper, primary consideration in deciding which asset class to invest in. Rather, capital preservation handily trumps return-on-investment as one's first concern at a time when the stock market, broadly speaking, is at risk of suffering a 70+% haircut.

No doubt, there will be good companies whose stock price will not crater as badly as market averages. Good luck, though, determining which of these companies will prove diamonds in the rough amidst a market otherwise consumed with panic! Contrarily, investment capital preserved in short-dated U.S. Treasuries rather will put you in position to accumulate diamonds when they are just lying on the ground. Once the market collapses, as appears increasingly likely, gems will abound.

Now, I might also take issue with Cramer's view toward Goldman Sachs. Maybe the firm is not the poster child for what makes Wall Street "broken" these days. Yet fiduciary integrity, or the lack thereof, is a larger matter affecting confidence, and on this account Goldman Sachs is in the eye of the storm.

Indeed, this matter of confidence surely is behind the surprising answer Cramer gives to "Bill in California" at about 8:00 following, this in response to a curious question about "diversification."

If you are wondering where before you have heard the same advice, it was right here.

Actually, I was surprised to learn that, Bill's question is one Cramer is often asked. What part I had in this I will never know. Still, I wanted to let you know that, Cramer is on board.

Diversifying your brokerage risk is, no doubt, sound strategy at this point in the unwind of Adam Smith's Leveraged Ponzi Scheme. So, make haste because trouble's spread throughout the trans-Atlantic appears to be accelerating.

* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!