Posted on 05/12/2015 5:44:08 AM PDT by expat_panama
The doomsayers always come out whenever stock markets get more volatile, like they have this month. These gloomy prophets go on and on about how derivatives are going to cause another financial crisis, or how valuations are stretched, or how equities will collapse whenever interest rates rise.
Individual investors read the commentary by these experts and wonder if they should adjust their portfolios, or even sell everything and wait out the impending collapse.
But before you do that, take a moment to calm down and have another think. In every single one of our 30 years in the business, someone, somewhere, has predicted a calamity. Sometimes, these prophets get it right, even if only by sheer coincidence.
Let’s look at five reasons though why you should ignore such dire market predictions, and those that make them.
Nothing grabs headlines faster than some so-called expert predicting a 50-per-cent market collapse. The media hops on board, further fuelling the fire in the market.
But keep in mind that almost every prophet out there has something to sell — be it a book, newsletter, website, research or alternative investment — that will supposedly protect against a crash.
Some, such as famed broker/dealer Peter Schiff, for example, are experts at using the media to highlight their dire predictions. Many authors love the publicity a doom-and-gloom prediction gets. Who wouldn’t want to buy a book telling you how to protect your investments against a crash?
I have seen numerous market crashes, financial crises, dot-com...
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(Excerpt) Read more at business.financialpost.com ...
Even if a crash is coming, what can the average citizen do about it? We don’t have enough wealth or political connections to get special deals. Banks pay literally less than nothing (negative return adjusted for inflation), real estate must be maintained and is taxed, gold and silver are incredibly volatile, a stuffed mattress can be stolen or destroyed, etc. I suppose one could simply spend everything and bank on the good will of others when one is too old or frail to keep working, but I don’t think that’s very wise.
The cost of liquidation includes missed opportunity so there is always a cost to liquidate.
More importantly when you choose stock in companies that have a stable product line with a good revenue stream the stock is worth more than money. Your position in the company shields you from inflation that will ravage the money you are holding. If we are bombed back to the stone age both money and stock will fail. On lesser events at least in the market the % you have invested in companies that survive will retain value and rise as the economy repairs while your money will need to be ferried in wheelbarrow loads to purchase anything.
The misconception is that money is of value in its own right. Businesses actually hold intrinsic value money does not. Dotcoms and social media are not conservative investments but conservative investments are not difficult to discover.
Fixed rate accounts, annuities.... these can work for you and be smart investments if you’re age is right I guess. I mean, a person who is 80 years old and goes into annuities probably makes sense. I retired at age 53. I’m almost 56 now. The last thing I need is a bunch of fixed rate annuities. I have to much exposure to inflation etc.
I look at it this way. Money invested should first of all be like Las Vegas money (don’t start preaching about retirement and long term). Money that if lost will not severely impact your lifestyle. No one knows what direction the market will go. The market is a guess at future value. Consensus and momentum override fundamentals. The big boys move the market not retail investors. Finally, if you have profit it never hurts to take some or all even if you like the stick long term. Missing out on incremental profit is always better than taking a loss. Interest rates up market down. Your guess is as good as anyone’s. With volatility it is possible to trade for profit but timing is key. Example bought at 200 goes to 327 down to 280 back up to 302... All within a year. If the fundamentals are sound why trade. Buy on the dips. Ultimately you sell but that is part of your overall individual strategy. This is opinion and not advice. For that it’s up to you.
If someone was absolutly positively convinced that a crash was coming, he could open an brokerage acct. (no min. amount w/ OptionHouse) and go into bearish funds, short selling, etc. Thing is that most doom'n'gloomers are convinced enough to ridicule where others have their money, but they're rarely convinced enough to risk their own money on their beliefs.
I understand. I have a good portion of my portfolio in hard assets. Rent houses and some mortgage loans I’ve made to buyers. And a portion of my portfolio in various financial investments.... for growth.
That’s the “put your money where your mouth is” idea....
A little time spent at Morningstar researching companies with wide moats and multiyear track records of stable or slowly increasing dividends would be a start at discovering such companies.
There is never any one certain investment but a basket of companies in a variety of industries, some consumer staples, some pharmy, some related to energy, some tech, manufacturing provides in my opinion the safest place for money that you do not need for daily life, money that you can watch loose 10-20% without needing to pull out. It is the best inflation hedge. I am not sure that the government will not try and take money from individuals IRAs and bank accounts but it may be harder from investments so slower for them to implement. That is an additional plus to being in the market. When the stock market act like a rollercoaster most days my portfolio doesn’t rock more than 1%, stuff balances out. I like it that way.
“I found a 3 dollar oil exploration stock that has good capitalization and can ride out the storms.”
Hmm...sounds like a good strategy. I’m bullish on oil stocks.
>1.) It cost me nothing to liquidate
>2.) If cash turns out to be worthless what are stocks going >to be worth?
Since 2008 we have been involved in a world currency war.
The latest salvo was QE Euro. Soon US companies will force
QE4 US to rebalanced profits.
To me the big number is the unfunded US entitlements.
Not enough dollars exist in the world money supply to pay
these entitlements. We are now ranging into the payout of those entitlements and into the inflation printing money to pay them. Thus like in the 70s your dollars will buy less and less, while real assets will hold real value.
Great video and the verse I have written in my brain for about 3 years now!! America shunning God, Christians who are living too fast to pray (of which I am guilty a lot), and skirting the law and/or scamming such things as insurance & SSI, etc. and thinking nothing more than a little guilt when a check or benefit arrives in the mail...please revive us!
When I was in China a few weeks ago, in the middle of a very formal business luncheon, a couple of the Chinese engineers pulled out their phones and started excitedly showing each other various charts.
I asked our agent, after the meeting if they were looking at stock charts, his answer chilled me:
“Oh yes... EVERYONE in China is now excited about investing in stocks. They have gone up very rapidly”.
What could possible go wrong with millions of market novice Chinese professionals throwing everything they own in to stocks??
Thanks... I agree with you!
An experiment was done one time where a chimpanzee picks some stocks along with several people. They chimp did as well or better than the rest. I remember that from one of my finance classes.
If gold goes to 2000K the dollar has lost value, but at least you can pay off debts which have remained constant easier.
We were just talking about that (“put your money where your mouth is”), the idea being if your advice is good enough for other people risk (of lost earnings) why isn't it good enough for your risk (buy short selling)?
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