If you are my client you would have been warned well in advance (summer and fall of 2007) that the stock markets would drop in value in 2008 and 2009. My original prediction was about a 40% drop to about 8,000 or 9,000 on the TSX – I believe now it could be even worse than that. Bank bail outs by governments will only keep certain firms from going bankrupt and may head off mayhem and riots in the streets. It won’t correct a recession or even a depression form happening.
There are two ways to lose big time in the markets:
#1) Market Timing (changing investments in reaction to monthly, weekly or daily news) most people get it all wrong and many lose more than they would if they stayed invested. Those that do get it correct much of the time rarely come out ahead of fund managers.
#2) Staying Invested through Systemic Failures (This are when the bulls are running crazy!) You can detect the impending systemic failure by noticing the Bull S_ _ _ !
One example of the BS I refer to is the myth created in 1998 and 1999 that ‘dot.com stocks’ (which were trading at ridiculously high price earnings ratios) were of a ‘new era’ in trading and fundamentals didn’t matter. BS! That smelled like BS and I knew it. That’s why I coached my clients to move between 20% and 40% from equities to bonds or cashin Jan 2001 and again another suggestion to move 20% to 40% more in June 2001.
The clients that listened were protected from a 30% to 40% drop in their funds. They were able to switch back into equities at lower prices. This put them over five years ahead in returns when compared to those that stayed invested!
The BS was obvious again in 2007. You can’t lend huge mortgages to people in low income jobs and expect to continue a never ending, artificially created, growth cycle in real estate prices. CNN and other media have been reporting this ludicrous practice for several years now.
These USA banks were lending money on mortgages and lying about people’s incomes on applications just to sell a mortgage. Their angle was that the real estate prices were increasing so fast that these poor people would be able to refinance in three years and keep their payments down.
It just couldn’t happen…..a mathematical impossibility. The houses stopped getting built at some point and when the market was flooded with extra houses the prices started to fall. Those poor people never stood a chance of remortgaging. It was simply logical to me. When you throw away the basic principles of finances things have to go wrong. When the practice is so widespread as we were informed for 2-3 years now it had to bring about a collapse. There was no other way.
This stock market decline didn’t happen in October 2008 it was in the making for several years – we just didn’t know which day or which month it would drop. That’s why I advised my clients to move to safe ground in 2007 and early 2008. They are happy now! That saved up to seven years worth of growth on their funds. (See comparison on below)
To those have not followed my advice so far it isn’t too late. These markets aren’t even half way down yet. (September 2008) The TSX will continue to drop to probably 8,000 or maybe even 7,000 before it turns around - you can still move and avoid losses and be set to earn more when growth starts again.
I can set you up with a systematic investment approach that will protect your money and make sure that you don’t miss out on the next growth cycle. I’ve done it now for two systemic failures and can still help you now. Just call me at 459-2224 (This prediction is not guaranteed – but it is based on my experience in predicting 2 to 5 year trends in the markets and I’ve not been wrong to my knowledge yet.)
“Enhancing lifestyles no matter what happens in an uncertain world"
COMPARISONJane sees systemic failure ahead and Bill does what fund managers and politicians want him to do to help them save face and that is to stay invested.
JANE moves to safe investments
BILL stays put.
JANE moves $100,000 to bonds and cash
BILL leaves $100,000 in equity funds
Markets drop 50% like they did from 2000 to 2003
JANE gets about 5% return for 3 years = $115,000
BILL funds drop by 33.3% (fund manager does not drop as much as markets) BILL has $66,600
DIFFERENCE between $115,000 and $66,500 = $48,500
CONCLUSION:
When the Bulls are running, run with them, but when the bulls start running wild, stop, sniff around. If you smell the B U L L S_ _ _ then get out of the way. If you don’t you may get run over by the stampede or get covered in BS
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