Bo Derek

Have you ever heard of a stock "Bo Derek?" Neither do I. But it is a term in the seventh edition of Barron's Dictionary of Finance and Investment. When I was in college, we had to buy this book, and I'm embarrassed to say that the first edition which I purchased at the time did not seem half as thick as the current version. And I think the reason for the bloat of the new edition is that many of the terms have not yet been deleted.

So what is a stock that meets the category Bo Derek? The dictionary says it is ...

"Perfect Stock with a record copy of the earnings growth, product quality, and the appreciation of stock prices. These stocks are named after the movie "10" where Bo Derek was portrayed as the perfect woman. "

I'm sorry, but I've been in this industry the largest part of two decades and no one - not a broker, institutional sales Guy, or banker, never used that term. If I happen to run across one of those magical perfect investment in the next two years, I'll be sure not to compare it to years, 52 years, but still attractive, actress ...

The term is simply outdated. Like the Blue Chip term.

A Blue Chip, the dictionary says, is "common shares of a company known nationally and has a long history of earnings growth and / or payment of dividends and a reputation for quality management, products and services ... "

Have you seen these lately?

Constellation Energy? This fails the test management, but there could be redemption there. General Motors and Ford? They fail the test management, and also, until recently, not known for quality products. AIG? Fannie and Freddie? Lehman? Any failure period.

Beyond the definition of Blue Chip is a connotation that has developed over many decades, promoted by companies the likes of General Electric. The connotation is that Caps = safety.

The notion that there are safe places to invest in the stock market is dead forever. He died when Bear Stearns collapsed on a weekend, and Lehman Brothers has filed Chapter 11.

The idea of Blue Chip died with these two companies. Take IBM, for example. This is not the king of technology, it was a time, okay, but Big Blue has been a classic blue chip since I'm in this business. While its stock has taken a hit, the company was well above the fray - spotless in the media by the digressions of the major financial and business models doubtful of domestic auto. But can we say IBM is a "safe" place to put your money? No more. The 2008 collapse of an entire generation will scare away investment.

Capital markets a sense, this might be the best thing that ever happened. No matter how polished a CEO is, no matter what the economic impact of a company has and no matter how it is embedded in American society, any enterprise - public or private - is an investment no-brainer. That is the lesson ... (cough - and if you did not indebtedness to purchase goods that you can not afford) ... that America should take from 2008.

So forget the Blue-chip stocks completely. Forget the whole concept.

But do not forget to invest in U.S. equity markets. And here's why ...

It is true that U.S. inventories are dynamited in 2008. But on the top 200 stocks that actually appreciated in 2008, 196 of them have market values of $ 2 billion or less. This means that the Top 200 best performing stocks of 2008, 98% of them were small caps. In a list like that, you have to separate the issues billboard legitimate transactions without volume.