Today's Market
by Dr Invest

Only five days ago, the reports of a "firm and rising equities market" flooded the news. Goldman Sachs derrided those, who in their opinion, were foolishly staying out of the market and were missing buying stocks at the cheapest they had been in years. For the 60% of the "financial talking heads" who had layed out their wise and logical arguments, only 30% of the economists/analysts were warning that impending danger lay before the market.

Sadly, the 60% were wrong and this week, billions of dollars have been lost by investors just like you. Let me put this into perspective. In the past five days, the DOW has lost 550 points. This is about half of the gains in the DOW from January to March. I held two stocks CATM and PETM that were sold as the market fell. CATM gaining 6% and PETM gaining 16%. Many investors are not that fortunate, they have invested into LONG-TERM FUNDS that have now lost half of their gains this year. (see: http://www.ajc.com/business/worst-loss-for-dow-1412381.html#fadetoblack)

Unfortunately, the party is not over. The VIX shows that FEAR is rising. Today, selling began in earnest and should the hopelessness continue into tomorrow, you will see the early signs of panic and a dramatic decline in the DOW.  For the sake of all my friends, I hope that such a dramatic decline doesn't ensue, but the market cares little about my thoughts.

How to Position Yourself

The first rule of investing is "Don't Lose Money!" If you are a "long-term investor", you hold-on and ride the market down, losing 10% , 15%, 20%, even 30%. If you have been following this blog, you will know that STOP-SELLS are suggested to decrease losses. Learning that you must be pro-active in selling your investments before losing money is an important principle in keeping your gains.

Only you, can contact your financial adviser and demand that he sell your loosing investments, and tell him, NOW! He won't like your demand, because he gets a "kick-back" for having recommended you to the fund and can only make money if you remain there. (One of those ugly secrets. And I can't say with certainty that all financial advisers do this.)  But the money you have invested is YOURS, not your financial adviser's.

You determine how much you are willing to lose in a down-turn,  and then DEMAND that your financial adviser or broker SELL, when you have lost that amount.

Future Outcomes

Over the past 12 years, the DOW has gained less than 1% per year and the S&P has been in the negative. When you deduct your fees of 2% to a financial adviser and the rise in inflation, you are upside down. At this time, with our nation's debt capping the possibilities of future growth, we are likely to remain in a narrow trading range.

To be sure, if Bernake doesn't remove some of the liquidity out of the market, we will see a rise in inflation and a rise in the stock market as consumers struggle to pay for increases in commodities. This will successfully penalize people who save money, but everyone will ultimately suffer in higher costs of living and taxes. Eventhough the figures in the market may change, the outcome will remain the same with a series of rapid up-trends and alter down-trends in a narrow trading range.

Until there is a reduction in national debt and the increase in national production, the financial stagnation will continue. Like the rest of the world, we have borrowed too much and worked too little. No one wants to hear this, but the years ahead will require a different kind of investing method to maximize your return.

(note: The above information is for entertainment purposes only and not to be used as investment advice.)