Investing In A Dysfunctional Stock Market

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                                                      Investing In A Dysfunctional Stock Market

When future generations look back on the time between the years 2000 and 2018, people will most likely roll their eyes and say, “What were they THINKING?  Trillions of dollars moved up or down on one person’s opinion.  How absurd is it that the whole world was being ruled by one person, and they didn’t even see it!”

“Markets go up, down and sideways on one person’s opinion, thoughts and ideas?!  That is just absurd, asinine, crazy and dumb!”  People will think, “Those of us in 2050 or 2100 are so much better than they were in 2013.”

But, this is the world that we live in now.  One person’s opinions move markets up and down.  It is so annoying, angering, crazy and amazing that this is happening.  Unfortunately, Mars, Saturn and Venus don’t have stock markets that we can use.  This is the only market we have on planet Earth.

My thought for the week is: “What a screwed up investment world we live in right now.”

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We can’t ask for another investment world, so we need to figure out what to do with the one that we have.  So, what do we do?

Below is an image of Reagan’s Cabinet in the ‘80s with a classic caption.  We know that the government can’t help.  We know that the Fed works for the largest banks in this country.  Yet, this is the market we are living in.

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The problem for the bottom 90% – 95% of people is that the direction of their net worth is going down, and it is getting worse, so this really is no laughing matter.

 

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Things that people need to buy are going up in price, and their wages are not increasing.  Therefore, they are feeling poorer over time.  The stock market doesn’t care because corporate profits keep going up, even though employment is going down. Again, as crazy as this is, this is the world we have made.

Literally, we are led by this one guy, who wasn’t even elected by popular vote.  He knows that he has the power to think, “My words are magical.  What shall I say today?”  Ben Bernanke is absolutely controlling the stock market, bond market, and currencies market.  And that is completely dysfunctional.

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I have this belief that since he doesn’t really know what he is doing, he simply rolls some special dice that tells him what to do that month.

The only difference with this dice, there are only three choices. (1) Say something to have people sell their positions or SELL. (2) Say something to have people buy more of their position or BUY. (3) Say something that is neutral or HOLD.  I found a picture of his dice in the image below.

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The stock market today really does feel like this.

Depending on how the dice falls, he might think, “I’ll come out and say words like ‘accommodative’ (which means to go and buy the stock market because it’s going to hit lifetime highs), or ‘taper’ (which means that people will sell).”

What will the magic dice have him say next week?

As crazy as it is, we really have no place to hide.  The image below shows that there are only four places that we can put our money on this planet.  We can put our money in companies (both public and private), currencies (either our own, or from other countries), debt (lend your money out to someone or something – some use the word bonds to indicate this sector), or physical (like real estate, commodities, rare wine, rare paintings, etc.).

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There is no fifth place to put your money.  You cannot take your money aside or remove it from the investment world.

With Bernanke and his magic dice and magical words, we need to figure out what to do.  As a market historian, I find this is completely absurd.  We are now in the Bernanke era.

We already know that opinions, emotions and news follow price.  Your strategy must then include price direction.   So, my question is: “Does your strategy include price direction?”  Whatever is happening, there is a direction to the stock market, bond market, and currencies.

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One question to ponder:

How are you using price to determine how your money grows?  (Keep in mind that I am not asking how old you are or how conservative, moderate or aggressive you are).

I’m asking something simple, what part of your strategy includes price direction?

So let’s see what direction our investable sectors are moving…

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As of today, publicly traded companies in the United States are going up.  In other parts of the world, they are either flat, or sideways. 

We also know that all printable currencies in the world are falling.  Since they are all falling together, we don’t really notice it that much.  When people have their money set aside in their currency, it really isn’t a form of setting money aside.

Your money is in whatever currency you have invested it in.  Therefore, you want to know what direction that currency is going.

Then, we have debt, which is bonds, or lending people money (to the government, other people, corporations, etc.).  That trend is dramatically down as of six weeks ago.

Lastly, we have physical.  It isn’t fair to say that all physical things are falling.  Commodities, gold and silver are definitely going down.  However, real estate in certain parts of the United States are flat, down and up, and in other parts of the world, it is hitting lifetime highs. So, I am using a general view when I say which sector is trending up or down.

As crazy and amazing as it is, this is the world that we live in today.  You need to remind yourself that you still need to protect and grow your money, pay for your child(ren)’s school, have money for retirement, etc.

In closing, yes…you should be angry.  And yes, the world that we live in, where one person’s words move markets, is crazy and stupid.  But one thing that you can do is use price direction in your strategies to help you protect and grow your money.

Fundamental information hasn’t been (and still isn’t) enough anymore…it hasn’t been for the past 13 years.

How can I help you?  I’m glad you asked.

In the next week or two, I am going to get my free training videos more accessible to you.  One of my big beliefs is that you have to be diversified into strategies, and not sectors or asset classes.  This is especially true when the world is in a secular, sideways stock market.

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We (the world) have been in a sideways stock market since 2000, and it will remain that way for another five years.  So, how do you invest when the world goes sideways?  These strategies will tell you how to do it.  Therefore, I’ll make sure that the training videos are readily available to you.

Together, we are growing and protecting your wealth,

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