It’s not complicated. Prepare all you want. But the bull ends. The
market sinks deep into its third bear of the 21st century. Wall Street
loses another $10 trillion of our retirement money.
Banks again get bailed out by clueless politicians. Their
CEOs pocket
new bailouts, splitting with the Super Rich. The recession goes on for a
few years, again. Growth slows, austerity increases with unemployment
and Fed rates.
That’s the relentless economic cycle. Predictable for eight centuries. But “it’s not complicated.” That’s the message in the fab-u-lous ATT ads
with those cute kids and their straight-man narrator all sitting in
little chairs in a kindergarten classroom. Kooky kids. Yes, Ad Age says
ATT’s hyping its brand in mobile networks:
“The kids’ imaginations turn boring brand attributes like multitasking
or download speeds into loads of fun .... Case in point: Dizzy boy ...
is able to wiggle both his head and his hand at the same time. Or the
precocious girl who notes that being fast is necessary to avoid being
bitten by a werewolf. Or the kids in a new NCAA spot who discuss how to
do two things at once in basketball, with the pickle roll.”
Werewolves of Wall Street, Washington will soon ‘turn’ America
Dizzy boy? Cute girl worrying about werewolf bites? The pickle roll in a
basketball game? If you have an imagination, you already know the right
answers. Yes, these kids remind me of the endless questions readers ask
about what to do when the market peaks, as it always does, like now, in
the fourth or fifth year of a bull market, then crashes. It’s not complicated, folks. Focus on the dizzy boy, or the pickle
roller, better yet, the precocious girl. Imagine, is she really worried
about werewolves? Naw, she’ll roll with the punches. You should too.
Investing is not really complicated. Nor are your investment strategies
that complicated. Limited yes. To four strategies. But when the market
peaks, the bubble bursts, when you see it crash a couple thousand
points, when you wake up to another recession and our clueless
politicians are conned into bankrupting taxpayers again, bailing out
Wall Street banks, again, and you’re wondering about your strategies,
again ... remember, “it’s not that complicated.”
You’ve been down this road before. This is the third time in this 21st
century. You should be used to it by now. First the bear/recession after
the 2000 dot-com crash dragged on for 30 very long, agonizing months,
far longer than the nine-month average. Then the 2007-2009 bear
recession also got agonizingly longer than usual.Now the current bull is four years old, ancient by historical averages. So a new bear crash is a no-brainer.
Now what? Think like a 5-year-old kid ... it’s not really that complicated
Seriously, you must be used to these painful cycles that Wall Street’s
too-dumb-to-fail bankers and Washington’s dumb-and-dumber politicians
keep subjecting American investors to. It’s not really that complicated.
Our so-called leaders really don’t know what they’re doing. But get
this, you do in fact know what’s best for you.
So let’s stop kidding ourselves, folks. Get real, this bull’s ready to
do the pickle roll in the pasture. Think of the dizzy boy. And that
precocious fearless little girl sitting in the small chair in
kindergarten. Crashes? Bear market? Recession? They’re like her little
fears of being bitten by a werewolf. She’d rather be a human: “It’s not
complicated.”
You’d rather be a human, a fearless investor, not turned into a werewolf
like a Wall Street banker or Washington politicians. You know you only
have four uncomplicated strategies.
So here’s a quick review. Seriously, you already know all four choices
... it’s not really that complicated, admit it, pick one, roll with it,
do what feels right for you.
1: Cash out (but only if you’re super savvy)
First big choice: Should you cash out, lock in gains, then wait
patiently until prices bottom to buy bargains? Sounds great. For guys
like Buffett. The Dow lost 4,436 points in 2000-2002. I remember getting
hundreds of responses to a column about that crash. One investor hit
the nail on the head: America’s biggest problem is our totally
out-of-control debt, and it just keeps getting worse:
“They all fall into the category of debt: We’re living beyond our means,
spending more than we take in and borrowing to make up the difference.”
It’s not complicated. Simple as that, we’re our own worst enemy, and we
keep sinking deeper as Washington borrows $1 trillion new debt every
year to finance out-of-control spending.
For a long time indecisive readers have been asking the obvious, like
the kids in that kindergarten: “If you’re right about a crash coming,
Paul, when do I act on it?” Back in 1999 one told me “I thought of
moving my 401(k) to bonds. Didn’t. Lost 40-50%. Ouch!”The signals were so obvious. In early 2000 as the dot-com market peaked,
too many absurd 100%-plus mutual fund returns and sky-high P/E’s
screaming, “Sell, Sell!” Paul Erdman, a well-respected MarketWatch
economist actually did dump his stocks. But few listened. His
fixed-incomes returned roughly 10% annually during the 30-month bear,
while the S&P 500 crashed into bear market with losses of $8
trillion.
2: Cash in (day trading, double down, shorts, puts, calls, action!)
Successful traders are a special breed unto themselves. Fortunately, a
majority of America’s 95 million Main Street investors figured out long
ago that active trading really is a loser’s game for average investors
with full-time jobs.Why? They tried, lost and read studies like the ones by finance
professors Terry Odean and Brad Barber and their seven-year study of
66,400 Wall Street brokerage accounts.
Their bottom line: “The more you trade the less you earn.” Buy-and-hold
investors in their research turned over their portfolios just 2% a year.
Active traders churned their portfolios an average of 258% annually,
but their net returns were a third less than their buy-and-hold
competition. One-third less. And that’s before deducting “opportunity
costs” and the added stress many traders complain of.
3: Sit tight, do nothing and ride out the storm
Yes, do nothing: Seriously, it’s not that complicated if you already have a well-diversified portfolio of stocks or one of our
Lazy Portfolios of
no-load index funds. Most don’t. The Ted Aronson’s Lazy Portfolio has
averaged almost 10% annually the past decade, none less than 8%
annually. When I asked Aronson about selling before a coming bear, he
warned:
“For good reasons and bad, I’d hold tight. The good include my faith in
capitalism and its ability to weather a storm, even one of biblical
proportions. The bad reason is, I have no faith in my ability to time
this sort of thing. Even if I got out in time, I probably wouldn’t be
able to correctly time getting back in!”Warning, trying to time the market is a dangerous fool’s game, and that’s from a guy who manages $21 billion.
4: Start building your own Lazy Portfolio today!
Wall Street, fund managers and the brokers have America’s 95 million
Main Street investors trained like little puppy dogs, brainwashed to
focus narrowly on their tips and hot stocks. These insiders get rich on
“the action,” all the buying, selling, trading; or charging you hefty
annual fees for baby-sitting your portfolio.
Yes, it is time to build your own Lazy Portfolio. It’s not complicated
to see why their time has come: For decades Vanguard founder Jack Bogle
has been warning that active funds skim and pocket a third off the top
of your returns.
Now InvestmentNews reports that America’s second largest pension funds,
CalPERS, the $255 billion California Public Employees Retirement System
that’s already half in passive portfolio strategies exactly like our
Lazy Portfolios, is considering going all in 100% passive.
The story behind the Coffeehouse Portfolio is a pitch-perfect argument
for creating your own Lazy Portfolio, today, before the next crash. Back
in the red-hot go-go days of the late 1990s Bill Schultheis, a 13-year
Smith Barney, broker quit and wrote a best-seller, “The Coffeehouse
Investor,” for people who wanted solid returns “without spending one
ounce of energy” playing the market.
Unlike Erdman, Schultheis didn’t cash out, go all-bonds and just wait.
Instead, he put just 40% in bonds, creating a well-diversified portfolio
with 10% in the other categories. His “Coffeehouse philosophy” is so
darn uncomplicated, just three principles: Build a well-diversified
portfolio, own the entire market with low-cost, no-load index funds and
develop a long-term financial plan and save regularly.
A bold move! You bet: Because back in 1999 over 100 mutual funds were
delivering 100%-plus returns. And their investors were expecting to
retire rich (and early!), thanks to those skyrocketing dot-com returns.
Wall Street laughed at Schultheis “wasting” 40% of his money on
low-return bond funds in his lazy “Coffeehouse Portfolio.”
But the laughing stopped during the 2000-2002 bear recession. His
portfolio beat the S&P 500 by 15 percentage point all three bear
years, with no rebalancing, no trading, no tinkering with allocations.
Meanwhile, hundreds of technology companies went bankrupt, Nasdaq
dropped 80%, and stocks lost $8 trillion in a 30-month recession.
So what’s your strategy? Think of the dizzy boy having fun. The pickle
roller. The fearless little girl sitting in a small chair in
kindergarten, rolling her eyes. Crashes? Bear markets? Recession?
You already know you have only four very uncomplicated alternative
strategies for any bear recession. And the secret is out: You also know
which of the four choices is yours ... it’s not really that complicated,
admit it, decide, go with it ... do what feels right, for you.
Contact Us:
Asad Rasheed
Direct:04-3841906
Email:asad@cfb.ae
Email:info@cfb.ae
For more information please visit our website: www.cfb.ae Here are some useful links that you can follow:
Here is another blog that provides regular news and information and is very useful to stay updated on the markets... http://centuryfinancialbroker.wordpress.com/
News Source: www.marketwatch.com
