Today's Market
by Dr Invest
Make no mistake, governments manipulate the markets. Sometimes this manipulation helps the people, but all of the time the manipulation helps the government and the financial institutions. I mentioned in a recent blog, that the robust life in the market was due to manipulation by the Federal Reserve. Look at my diagram below:
Using a grocer called, "Whole Foods", we can see that they had a gross income of 1 billion. With the stimulus program, QE-1, QE-2, and twist, 25% more liquidity is added to the market. No, the fed didn't print more money, but there is money movement or availability to the banks that wasn't there before. The result is just what we have seen, increases in the cost of commodities. Over the past months automobile gas, food, and materials have increased.
Whole Foods must transfer the cost of increased transportation and food costs to their retail consumers. That 25% stimulus by the government, now has to be paid for in the form of inflation to the consumer. So look what happens to the GROSS INCOME and NET PROFITS of Whole Foods. That's right, everything rises 25%. The government gets a glowing report from Whole Foods of increased income and profits. Wall Street goes mad buying into the rising Whole Foods stock and urging consumers to invest all their money into Whole Foods stock. All the time they know that the way things appear is only "smoke and mirrors" and within months the economy will sink again.
(note: Whole Foods and figures used herein represent no actual company or its gross profits.)
Think back to Bernanke's warning of a dismal and distressed economy that may possibly sink again. He is trying to tell you something. He knows that no real money has been created. Wall Street also knows that no real value has been produced and that the Fed is only suggesting a 2% growth in the GNP in 2012. Stay out of the market, now is not the time to buy. Buying now is putting your money at risk. The rise over the past three months is ARTIFICAL. When the time is right, the "smart money" will sell, then you will be stuck with the bill. The government and their financiers will be eating steak, while you will be eating chicken neck!
The New Normal
The old method of "buy and hold" will no longer work. We have exchanged normal rises and falls in the economy for stimulus that will guarntee that no one suffers loss. While we pretend that the market is stable, our seeming stability comes at a price. The cost is debt for years ahead and lethargic returns in a volatile market place. Like Japan, before us lies years of painful stagnation and inflation (stagflation) caused by government polices that smother free enterprise.
To see any gain, you will need to change from the old methods that result in continued losses and manage a more active portfolio. Seasonal Investing is a powerful source that can help you enrich your gains with fewer trades and less time with your investment at risk in the market. If your money is in the market, it is at risk. The 'Buy and Hold" strategy puts your money at risk 360 days a year. Seasonal Investing puts your money at risk only 6 months out of the year and when you are most likely to see gains.
Look at the charts below:
May through December has been, on average, the best for 10 year bonds. The bond market is somewhat oversold at this time, but gains may still be possible.
The Benefits of a "Sell in May" Strategy
Just how effective is a "Sell in May" strategy? Look at the graph below:
What we see is radical return for a BUY in October and SELL in MAY method of investing. The performance is almost 4 times that of a "Buy and Hold" method of investing. A "Buy and Hold" method is only a reason for an investment adviser to collect his fees and ignore your investment when it looses half of its value in the next market downturn. "Oh", he will say, "you just need to ignore the market downturn, you will regain it all back. Don't miss out on the growth opportunity, after all, no one can time the market." Using these charts, you don't need to time the market. You just need to be in the market at the right time... from the end of October to the end of April.
The above charts are older charts and possibly do not accurately reflect today's market. I am, however, using this method as I make my own investments and can attest to the positive results of using this method. Some people think I am a stock guru, but by using several methods beside the "Seasonal Strategy", you can reduce your risk and elevate your opportunity for reliable returns.
ETFs to look at for overall stock and bond returns:
- VTI - overall U.S. stocks (End of October investment)
- VT - overall world stocks (End of October investment)
- BND - U.S. bond fund (May investment)
- TIP - U.S. Ten Year Treasuries (May investment)
Please, consider the stock or bond performance before buying. A Seasonal Strategy isn't blindly buying and hoping for the best. You still need to make sure that your selected EFT is moving upward in price and you need to have placed a STOP-SELL to limit your financial losses.
See the link below for a more detailed description of Seasonal Trading and methods:
(Note: the above information is solely for entertainment purposes and is not to be used as investment advice.)
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