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Are you afraid to invest in the stock market?
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Why most experts were wrong and continue to be so.
As we slide down again today (March 05,2009) I can only think back to a point over 1year ago where I was standing in the accounting office of the firm I work for. I explained to several tie wearing suit clad figures that it was time for me to move my 401k to a safer haven and that I wished to move it into the money market. There were few raised eyebrows, a couple of smirks, and several reasons as to why that was a bad idea. "The market always has ups and downs. You can't time it" "You will be missing out on the dividends" "You will only gain 4% in the money market" I insisted and ended up moving it myself. As things drop I can only think it will be better to start with 100% of my money when we do hit bottom then with 40%. As companies slash and trash dividends I guess I won't be missing out on those. A 4% gain is better than a 60% loss. As we continue to slide bottom pickers come up and say..this is it. I see them here posting how it is time to get back and and stocks are as cheap as they are going to get. Experts experts experts. Most of them were wrong a year ago, they were wrong six months ago, and they are wrong now. Why? Because they all read the same books and are going off the same old principals. They are using charts and statistics of past events without stopping to think that we are playing under a different set of rules. Almost all of the charts are broken at this point. Chart reading is worthless. Trying to find support levels and candlestick reading and old convential things that worked in the past won't work anymore. What they fail to grasp is basic human emotion and the new rules we are playing with today. They want to refer to the great depression? Well teh FDIC didn't exist at that time. The new rules are out and here they are. 1) The internet. What this has done is help spread news faster than any wildfire. Good news or bad it gets splashed around and rumors of collapse can start a run on a bank. Take Washington Mutual that had 17b in deposits pulled in a few days that helped cause its collapse just because people were afraid it would fail. 2) The Internet again with online accounts. Everybody is an expert now and in charge of their own money. They can get Etrade and Scottrade accounts as well as countless others online trading accounts and buy and sell stocks at a moments notice. They can log into their 401k accounts at Fidelity and Principal and move their accounts into cash. The problem this presents is true experts won't trade on emotion. Most people do. Emotions can cause stupid mistakes. Whether it hurts to hear or read, most people should not be allowed to trade their own money. 3) Government involvement. No matter how much the government is involved now, there are unintended consequences to every penny and action they take and boy have they been active over the last couple of years. Names like Bernanke, Paulson, Geithner, Bush, Obama, and so on. We have entrenched congress and the senate into businesses such as AIG, GM, Chrysler, Bear Stearns, Merril Lynch, and others. Trillions have been spent. There are no books written on how to trade or deal with this market. We are on new ground. History is being made and things are changing. We are breaking new ground everyday yet these experts cling to their old charts and ideals hoping they will hit or miss on something and be right for once. 4) They listened to the pros that were wrong as Well. Warren Buffet to name one. Boy was he wrong. He's lost billions. Thing is he can afford it. Can you? There are too many to list. 5) Never in time was so much wealth created based on nothing in such as short amount of time. The period between 2002 and 2007 saw explosive growth. We had to come back to reality. I mean how many DVD players do we really need in a home? IF 100 companies are churning out 1000 units a day, its just a matter of time before there are too many and the prices come crashing down. Competion, prices, and lack of customers...well it was going to happen. 6) Pure unhindered Greed. Blame the government Administrations, consumers, loan sharks, wallstreet, or whomever you want. The free ride and party is over. It is time for America to pay for its stuff. We had a nice little shopping spree and the bill is due. Too bad so many cannot afford to pay for what they wanted. There were no books written about how to deal with millions of dishonest people. 7) The lies that were told. Bearn Stearns CEO on March 14 got a lot of suckers to buy stock on that Friday for around $50.00 a share. By Monday it was worth $2.00. In February 2008 Bush said we were not heading towards a recession. These are just two off the top of my mind. There were I don't know how many lies told from government officials and CEO's over a two year span. You cannot trade in a dishonest environment. I don't care how good you are or how many books you've read or how many chart classes you have taken, the deck is stacked against you. Perfect example of a CEO of a major home builder stealing money from the common shareholders. http://finance.yahoo.com/news/Former-KB-Home-CEO-indicted-apf-14563331.html They will rewrite the books for the future. If you seriously want to get into the stock market now, it is your money. You better think twice and crawl up the CEO's butt with a microscope and check things out before you buy stock in that guys comapany. You'd better not be playing with money you or your family needs either. 8) Naked Short Selling and removal of the uptick rule Lets face it. It is just as easy to sell stocks you don't own as it is to buy stocks you want to own. What this has done is create a market that has huge swings and a lot of volatility. These large swings suck people into buying at the top and selling at the low causing every bigger swings. Especially on the Nasdaq. It used to be that you could only sell a stock short when it was going up. Now, you can find a stock that is getting beat down and then dog pile on it until it basically forces the company under. Take a really good look at what happened to GE. Or Calmain Foods (CALM) that has about 1/4 of its float shorted. Then there is naked short selling. It is illegal and you'd better believe it is going on right now. http://en.wikipedia.org/wiki/Naked_short_selling I know many people are wanting to dive into the market but you'd better realize what is going on before jumping into the grinder and become a pro by paper trading before using real money.
- TAGS:
- stock_market,
- investment,
- financial,
- recession,
- retirement,
- money
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