Credit Card ’s Talk

Humpty Dumpty had a great fall and all the King?s horsemen could not put Humpty Dumpty back together again.

The Stock Market has had a great fall and all the brokers, CEOs, analysts and politicians have not been able to get it back up again.

Oh, it will go up again, but if history has a way of repeating it will be a long time before we see it at ?even?. From 1920 to the present there have been 3 major bull markets lasting close to 16 years. Unfortunately, each has been followed by a bear market of about the same length of time. So far we are ending the 3rd year of the projected down cycle with only 13 more years to get to the bottom. It is a long way off.

At a recent investment seminar one of the speakers asked his large audience if they believed the stock market would be higher 5 years from now. Every one except one thought it would be. The current mindset of most investors believes this also. For the period from 1982 to 2000 (18 years, close enough) there has been a bull market. Every investor has considered himself to be a financial genius during that time. There is an old saying, ?The market makes fools of us all ? sooner or later?.

Unless you learn to listen to what the market is saying and not your broker, you will be able to recoup some of your losses, but probably not all. During this long-term bear called a secular bear market, your main effort will not be to make money but to keep from losing more. During a bear market the one who loses the least is a winner. You may not like what I say, but history has that strange way of doing it over and over.

Maybe I am wrong about it because ?this time it is different?. I hope so, but you can protect your money in your 401K or elsewhere with a simple loss limit order. Call your broker and have him place a 10% (or whatever number your prefer) stop-loss order on all your positions. That way you don?t guess about where to sell; you let the market tell you when it has turned weak.

Brokers and brokerage companies hate stop-loss orders and will try to talk you out of it. Ask him if he will guarantee your portfolio. You can bet he isn?t that dumb. It is your money. Once it is gone you will have very little chance of getting it back. Protect what you have left.

Don?t be a Humpty Dumpty!

Al Thomas

Author of If It Doesn’t Go Up, Don’t Buy It!

Never lose money in the stock market again.

http://www.mutualfundmagic.com

There is no question that the stock market is being affected by war jitters. When it looks like peace we have a strong rally. When it looks like shooting will begin momentarily the market takes a dump. What should you do with your stock, mutual funds or cash that is waiting to find a home?

Back when I was a floor trader we had a saying ?When in doubt get out?. And that applies just as strongly today to everyone whether you area professional trader or a retired person living off your equity income.

You might say that I am not a trader or speculator so I won?t do anything. Let me clarify what you really are. You are a speculator whether you want to admit it or not. The only thing that separates you from the floor trader who is scalping for a few ticks and someone who has thousands of dollars in a retirement account is the time frame. If all you do is buy and hold you still are a speculator. You are hoping the market will come back. Your broker told you so.

What your broker did not tell you is that long-term bull markets are followed by long-term bear markets of equal length. Because we have been in a long-term bull from 1982 to 2000 the mindset of the investor has become conditioned to believe the every correction will see another new high. That is true, but can you afford to wait that long? In the crash of 1929 ? ?32 it took almost 25 years to see a new high in the market averages. Do you have that much time? Also folks don?t remember that many companies went out of business so your ?average? went out the window.

With the market so precariously perched it might be best to stand aside with your cash in your hand or under your mattress. When the Iraq war starts we could see a 1,000-point move ? and it could be either direction. What kind of a gambler are you? We?ll see.

Ask yourself this question: Is this bear market caused by Iraq? Back in 2000 no one knew where Iraq was on the map much less were able to spell Baghdad. We can?t blame Saddam for the loss of about 50% of market equity. When it comes right down to it the Iraq war is just another event in a long-term bear market just as 9/11 was. Events do trigger violent moves, but the overall trend is what is important and now that is down.

Another old saying is ?don?t fight the trend?. War or no war the safest place for your money is not in equities during this down phase. Cash or bonds are the only place to be.

Are you ready for the next violent move?

Al Thomas

Author of If It Doesn’t Go Up, Don’t Buy It!

Never lose money in the stock market again.

http://www.mutualfundmagic.com