All of the talking heads have been telling us that this market is different. You are going to have to be patient and soon (hopefully in your lifetime) the DOW and the Nasdaq will be back at their old highs. They cite all the statistics about how the economy is improving - consumers are spending, the consumer confidence index looks OK, unemployment is getting better, blah, blah, blah.
Those trees are all nice, but they better step back and look at the forest. It's on fire and going up in smoke. The major trend has been down since the beginning of 2000 and is continuing with only occasional brief upward movements. The Dow lost 6% in 2000 and another 7% in 2001 and so far this year is off almost 8%. I won't mention the Nasdaq. That is ugly.
From 1931 to 1951 the economy doubled. The Gross Domestic Product was up 100% yet the stock market did nothing for 20 years. What few investors that were left after the '29 Crash made their money from dividends not stock price appreciation. It took 25 years for the stock market to go back up to the 1929 high.
Why are we in a bear market that can last for many years when things look so good? There does not seem to be a correlation between a good economy and stock prices. For more than 100 years the P/E ratio for the S&P500 index has been about 15. Today it is 41. That is figured on the earnings of a company paying you back your money in 41 years. YEARS! Are you kidding? I'll need my money before that. Very simply this is telling you that the stock market is very over-valued. Either corporate productivity must increase dramatically or stock prices must come down. Right now it looks like the latter is happening. So far about $6 trillion (that's with a 'T') has vanished from stockholders portfolios these last 2 years. Nobody else got it. It's just gone. It was all paper profit anyway.
Your broker tells you you don't have a loss until you sell and not to worry as the market always comes back - except when it doesn't. Since 1920 there have 3 major bull markets that have lasted about 16 years. The last one started about 1982 and ended at 2000. Each one of the bulls has been followed by a sideways to down market for the next 16 years. I am no soothsayer, but this has all the makings of one of those 16-year periods. What to do?
There is only one thing that is prudent until the carnage stops. Sell out of all stocks and stock mutual funds except no-load bond funds. (It is not too late to sell.) There are many good ones such as Government, International and Mortgage Backed no-load bond funds with varying lengths of maturity. It may not be exciting like the 1998-99 run up, but you will have your money when the dust settles.
This market is different. It's a bear.
Al Thomas' best selling book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter to receive his market letter for 3 months at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.
Comments to al@mutualfundmagic.com
Copyright Albert W. Thomas All rights reserved.
maid service near Lake Forest ..Day trading is all about making buy and sell decisions.... Read More
The Surgeon General of the United States says that smoking... Read More
Let's hope you did not have any of the Enron... Read More
Outlined below are some of the advantages and disadvantages of... Read More
In 1960 an engineer working for a watch company in... Read More
It looks like the market is ready to start up... Read More
Money management starts with protecting your capital, realizing profits and... Read More
I continually hear from economists, talking heads, other market letter... Read More
When we go to the circus we see a trapeze... Read More
The basis of diminishing return discussions surround such simple notions;... Read More
Two weeks ago I wrote about what the Securities and... Read More
When purchasing mutual funds we are cautioned to read the... Read More
Why? Because I am going to shatter your conventional wisdom... Read More
If you haven't heard of the technical indicator with the... Read More
I love roller coasters. The steeper the better. High and... Read More
I'll bet with almost anyone that has stocks or mutual... Read More
As an investor you will want to check out any... Read More
Exchange Traded Funds (ETFs) are a group of passive index... Read More
To begin, you might look at playing the stock market... Read More
Robert Rodriguez likes to buy stocks at their lows. When... Read More
Fundamental analysis.Fundamentals analysis says the best way to predict the... Read More
Carefully thinking through your goal as a trader is of... Read More
Any online investor / trader seeks an excellent off or... Read More
With the stock market stubbornly refusing to settle down and... Read More
Ever jumped out of an airplane? It's OK if you... Read More
top rated cleaning service Des Plaines ..It looks like we have now entered a new bull... Read More
Carefully thinking through your goal as a trader is of... Read More
One of the great truisms of Wall Street is "Don't... Read More
How many times have you said to yourself, "I'd like... Read More
We all know the expression, "My country, right or wrong",... Read More
Most advisors will tell you they can beat the market.... Read More
Before they go over the cliff to their destruction these... Read More
As a novice trader, you'll often feel the need to... Read More
With the stock market stubbornly refusing to settle down and... Read More
What is the Series 7 Exam? If you... Read More
I continually hear from economists, talking heads, other market letter... Read More
Because there are so many stocks that are NOT paying... Read More
On Friday or Saturday evening my wife gets a movie... Read More
Sometimes the best way of lowering exposure to risk is... Read More
Today's society gives special recognition to alcoholics, sexaholics, binge-aholics, shopaholics,... Read More
You probably have been told that options are risky. Even... Read More
Wall Street has been preaching the doctrine of Buy and... Read More
Whenever I see mutual fund comparisons in the trade publications... Read More
In 1960 an engineer working for a watch company in... Read More
It takes a total mental commitment to the task. It... Read More
A recent cartoon in my daily newspaper showed two guys... Read More
Are hedge funds a suitable investment for you? Hedge funds... Read More
What! Me worry?Many of you remember the cover of MAD... Read More
For some "long term" would mean holding a stock position... Read More
The stock market has been in an up trend for... Read More
Stocks & Mutual Fund |