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The other week, a friend of mine sent me an article from a financial adviser in the U.S. Asking me for my opinion. In the article, the adviser stated two things that stood out to me like a two-ton boulder falling out of a clear blue sky. They were the following. In response to the short rally that U.S., European and Asian markets were experiencing at the end of January, he stated, "I see this time as a Buying and repositioning chance with great possible gains soon to come", additional clarifying that statement with the exclamation of "It is hard to imagine any time in history when such rampant pessimism about the cheaper has existed with so minuscule evidence of serious trouble." When I read those statements, I had to read them again to make sure that I was reading them correctly. I plan to myself, What is this adviser smoking? His commentary of there is "so minuscule evidence of serious trouble" must have been drawn after scouring the pages of mainstream newspapers and financial websites that merely spit back what the industrial speculation manufactures wants them to say and after learning government statistics that grossly distort the true photo of economic health. Yes, I know that there are inescapable asset classes that will rise even in bad, terrible markets. In fact there are those that will rise straight through the roof in terrible markets. But it was clear from the context of this message that this adviser was speaking of mainstream S&P 500 and Dow 30 type of stocks.
A quick perusal of the last six months of my archives here will tell you exactly why government statistics and mainstream financial media never tell the truth about the health of the global economy. Remember, Jim Cramer, a previous Goldman Sachs broker, the founder of the Street.com, and host of Cnbc's Mad Money Tv show, said, "What's foremost when you are in hedge fund mode is to not do whatever remotely truthful, because the truth is so against your view". He claimed that it was easy to plant rumors in newspapers and the medias to drive the prices of stocks down when he had bets on the opposite side, because the Sec didn't understand what it was he did. Do I verily think that Goldman Sachs, a firm with a direct line to the U.S. Treasury (through ex-Ceo Hank Paulson) is verily dumb sufficient to believe their own statement at the end of November, 2007 that gold would plummet to the 0-0 range in 2008 and thus shorting gold was one of their absolute best 10 trades of 2008? verily not. Do I think they were taking benefit of Jim Cramer's maxim of "not do whatever remotely truthful, because the truth is so against your view" to manipulate markets so that they could make more money? verily yes.
So should you ever consequent the sentiments, data or statistics reported in the mainstream media without digging Much More deeply to see exactly how deep the rabbit hole goes? In one word, Never. If you do, you'll draw the same conclusions as the above adviser that there is "so minuscule evidence of serious trouble" in the U.S. cheaper when the evidence is Overwhelming, but private and simmering hotly beneath the surface. Albert Einstein once said, "After hydrogen, stupidity is the next most base element in the universe." Smart firms comprehend this and constantly manipulate the vastly slow-witted thundering sheep herd to make profits at their expense. Do you know that last year, during the second quarter of 2007, I received an email from a firm stating that this will be the most bull shop in history and that a 16,000 Dow was very likely by March, 2008? I'm sure the thundering sheep herd digested that email, hook, line and sinker and plunged millions of dollars of cumulative assets into this firm because they didn't want to look foolish and be left out in the cold during the most bull run in history. Although I constantly refer to the investing masses as the "thundering sheep herd", perhaps I should change that phrase to the "thundering lemming herd" because lemmings are know to blindly consequent each other over a cliff to their own death, and that is exactly what the vast majority of investors are doing today.
I read an additional one story from an speculation newsletter publishing firm that verily admitted that they shop a newsletter that loses money much harder than an additional one newsletter they publish that verily makes money because they have come to comprehend that the thundering sheep herd is much more comfortable inviting in the same behavior as their neighbors and friends. Though my own speculation newsletter's Model portfolio is now up 19.68% since our launch 7 ½ mos. Ago, and our Currency portfolio is up an even greater 37% since our launch 5 ½ mos. Ago, I warrant you that I would sell 100 times more subscriptions if I launched a second speculation newsletter that was full of nothing but mainstream strategies that every investor was customary with, even if it lost money.
Since stupidity is the next most base element in the universe next to hydrogen, it will all the time be much easier to sell a losing speculation newsletter than a winning one because the losing ones contain all the losing strategies that all investors are customary with, such as : "stay constructive and buy the dips", "stay invested for the long term because stock markets in the long run all the time rise" and so on and so on. Thus, the speculation newsletter publisher I referred to above admitted that they would continue to push their losing newsletter to thousands of more possible subscribers because they are in the company of manufacture money, not selling good advice, and the losing newsletter Sells while the winning one does not. To this, I conclude a Gumpian closing (as in Forrest Gump), "Stupid is as slow-witted does."
So let's deconstruct some of these incredibly dumb strategies above that are being pushed upon the retail investor, such as "stay constructive and buy the dips". With the overwhelming evidence of severe economic problems in the U.S. cheaper that have already spread to major global economies with strong U.S. Ties, "buying the dips" is like inviting from the galley to the ballroom on the large and reasoning that doing so will save your life. It might buy you some extra time, but on a sinking ship, the best thing to do is to get off. And staying out in cash is just as dumb a strategy. You can all the time make a fortune from accident if you know what you are doing. As Warren Buffet stated, "the only risk in investing comes from not knowing what you are doing." I've seen many emails and articles over the past month that have urged their investors that have lost needful portions of their speculation portfolios not to panic because history has shown that in the long term, stock markets all the time rise. Thus, they concluded, stay the course, and you will be okay.
They gain your confidence in these foolish statements by showing you some chart of a major index that covers a 100 year time duration that uses monthly averages to cover up vaporing periods so the indexes appear to go straight up over history. These charts, these firms tell you, prove that it's not needful to alter any of your current strategies, even if your portfolio is hemorrhaging now. That may very well be the most ridiculously poor guidance I have ever heard in my life, next to the statement that diversification is a solid speculation strategy. "Don't panic" is solid guidance because no decision should be made under emotional duress. However, as a Navy Seal martial arts teacher of mine once told me, "If there is a problem, don't ignore it. Fix it as soon as possible."
In fact, the stay the procedure mantra is the same thing these advisors told their clients during 2000-2003 when the S&P in the United States shed close to 50% of its value. Again, forget about the 100-year charts advisors all the time show you to tell you that you are doing the right thing by staying the procedure and by staying fully invested in primary stocks. High-priced metal bullion and stocks are two of the very settle on and few asset classes you should be invested heavily in right now. Unless you are a 30-year old man or woman that plans on living until 130, these 100-year charts have no applicability to your current speculation strategy.
Let's take a look at the much broader S&P 500 index over the last 8 years. If you look at the 8-year S&P 500 chart, even if you don't adjust for the devaluing effects of inflation, you are now underwater from 8 years ago. Take into inventory likely inflation of 6% to 10% a year over the last 8 years (the gross misrepresentation of real inflation rates over the past 15 years in the U.S. Is a topic for an additional one day), and the real purchasing power parity of your invested dollars now is Well Below levels from 8 years ago. For example, all things now should be measured against the price of gold. (I've heard population say that, despite the housing accident in the United States, that apartments in New York in prime locations have still appreciated considerably in the past seven years. It would verily appear that way until you price that apartment in gold. If you did, you would witness that the price of that apartment has verily fallen if it was priced in gold. That's what I mean by the fact that true rates of inflation are heavily disguised and grossly under reported in the United States.) In any event, back to the S&P 500 chart, that's a whole lot of waiting for a whole lot of losses.
If you have some silly advisor that is telling you to stay the procedure because history says that stock markets all the time go higher, or that this minuscule mini rally is proof that the markets will turnaround by the end of the year, you should be panicking now. Why? Your advisor is beyond a shadow of a doubt, The most Risk you have in your portfolio. base sense says you play the odds and red flags exist anywhere that the U.S. cheaper is in serious trouble. perhaps the U.S. Federal sustain will slash the Fed Funds rate all the way back to 0.75% as they did any years back, but even then, for reasons too numerous to discuss here, slashing interest rates will have a point of diminishing inescapable returns. So no matter what the Feds resolve to do, their options are disastrous. Slash interest rates and threaten to destroy the global cheaper as they did back in the late 1920's and early 1930's, or raise interest rates, and cause deeply in debt Americans a whole lot of pain that the U.S. Is not prepared to handle. Either way, the odds say, it will take a miracle to pull the U.S. cheaper out of disaster and the status quo to perpetuate one. Right now, I wouldn't place all my chips on the miracle taking place.
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