You know people have gotten too complacent about investing in the stock market and what it takes to grow real wealth when…
- People bragging about becoming 401(k) millionaires and posting their balances on social media has become a “thing” (remember when everyone from the company executives to the janitor were bragging at the water cooler about being real estate millionaires, just before the last crash?)
- People start to think they can actually retire comfortably on $1,000,000 (you can’t, because the IRS will take at least 25% – 33% off the top, and you’ll need $500,000 just to cover out-of-pocket healthcare and long-term care costs in retirement)
- The personal savings rate fell to its third-lowest on record at the end of 2017
- Consumer spending is rising, and more of it is being fueled by debt (the last quarter registered the second-largest percentage increase in charge-card debt in a decade)
- Inflation is taking a bigger bite out of Americans’ paychecks (real average hourly earnings of 80% of employees fell by half a percent in January – its fifth decline in six months)
- Hundreds of major companies have price earnings ratios that are higher than during the height of the 2000 and 2007 bubbles
- For a decade now, central banks have pretended they can print up prosperity (which they’ve done at a magnitude beyond imagination… and we’re supposed to have blind faith that they know what they’re doing)
[Read more…] “7 Warning Flags and Financial Risk Factors We Face Today”
What was until recently an unloved bull market has now reached the point of “euphoria,” and investors are “having a hard time imagining a decline,” according to Morgan Stanley.
After all, what’s not to love about a bull market that has only two directions – up… and up faster?
It’s being called a “market melt-up,” and the main fear people now have is of missing out.
Those caught up in the euphoria – and the fear of missing out – might want to consider the following:
- The S&P 500 is trading at 2.3 times its companies’ sales – a smidgen below its dot-com peak
- Price-earnings ratios have only been higher for 1% of the stock index’s history
- The cyclically adjusted price-earnings ratio is higher than before the crash of 1929, and higher than at any moment in history except right before the dot-com crash
Those of us who experienced the pain of the dot-com meltdown in 2002 and the financial crash of 2008 hope that the market will never become that irrationally exuberant again.
Back then, people justified their exuberance with the mantra that “this time it’s different.” [Read more…] “The Stock Market Never Goes Down Any More? (Really?!?)”
Richard Thaler, who won the Nobel Prize in economics in October of 2017, observed…
We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping.”
Thaler has made a career of studying irrational and temptation-driven economic behaviors.
The current bull market is the second longest in modern history. If it manages to last until August 22, it will become the longest running bull market, at 9½ years.
No bull market has ever made it to its 10th birthday.
Which brings me to a very simple, but profound question…
What Happens When a Bull Market Ends?
[Read more…] “Nobel Economist Warns of Irrational Exuberance in the Stock Market”
When we released our Stock Market Survey a few weeks back, we were surprised so many readers responded. We were even more surprised by the results of the Survey, which we promised to share with you, so read on…
Nearly half (45%) of those who took the survey said, “I don’t trust the market with money I can’t afford to lose.” They clearly understand that the money they’re setting aside for something as important as retirement or a college education is money you really can’t afford to lose.
Fully 45% of our subscribers believe a major market crash – a plunge of 50% or more, as we had in 2000 and again in 2008 – is imminent. And another 34% expect that calamity to happen in the next 3-5 years.
But when we brought the situation closer to home and asked readers how a severe market crash would affect them personally, we found wave after wave of denial.
About 12% said that even if the market drops by 50%, “I have plenty of time to recover.” I suspect these folks don’t realize that since 1929, we’ve had three market crashes where the Dow took between 16 to 25 years to recover. What if history repeats itself? [Read more…] “Stock Market Reaches New Highs – Do You Trust It?”
You’re not reckless. You don’t like to take unnecessary risk. But you don’t want to run out of money in retirement. And your financial advisor says you must invest in the market to provide for a secure retirement.
Do you really have to take those risks? What if I told you that hundreds of thousands of people are building their retirement nest egg without even going near the stock market … or the real estate market … or precious metals?
When people think of “the stock market,” they often equate it with the Dow Jones Industrial Average (DJIA) they see quoted everywhere.
The Dow is the most recognized market index in the world, and looking at its performance can help answer the question: Does your advisor’s advice make any sense?
The Dow has gone up over time – but has it gone up enough to make it worth the risk?
Only you can decide if it was worth the risk to you. But to make an intelligent decision, you first need the answers to two questions:
- How much has the Dow gone up?
- What were the risks?
Only then can you decide if it was worth it. [Read more…] “Why Your Efforts to Grow a Retirement Nest Egg in the Stock Market May Disappoint You”
Do you believe the economy has improved significantly since the Great Recession?
Or do you feel like we’re staring down the barrel of a cannon whose fuse has already been lit?
The stock markets should be down considerably by plenty of measures, but many investors appear to have been hypnotized to believe that nothing can go wrong.
I believe things are worse than they may seem on the surface, and extreme caution is warranted, for the 7 reasons I spell out here.
I’ll also give you some tips on how to protect yourself and have a “Plan B” in place in case the you-know-what does hit the fan.
Here Are 7 Reasons the Economy is Worse than It Seems…
1. Addiction to Stimulus and Low or Negative Interest Rates
[Read more…] “7 Reasons the Economy is Worse than it Seems”
The latest report from DALBAR reveals the harsh reality about the actual returns stock market investors have been getting for the last 30 years.
Would it surprise you to know that many investors haven’t even been able to keep up with inflation for the last three decades?
Many investors haven’t, according to the 2016 Quantitative Analysis of Investor Behavior.
Here are the facts about actual long-term investor returns
The average investor in asset allocation mutual funds (which spread your money among a variety of classes) earned only 1.65% per year over the last three decades!
These investors didn’t even come close to beating inflation, which averaged 2.6% per year.
The average investor in equity mutual funds averaged only 3.66% per year – beating inflation by only 1% per year. (Was that worth the roller-coaster ride and sleepless nights?) [Read more…] “Dalbar 2016 Report: Many Investors Haven’t Even Kept Up With Inflation”
If you receive emails from investment advisory services, you may have gotten a sales pitch for The Big Black Book of Income Secrets from the Palm Beach Research Group.
The promo promises you’ll discover “30 unique income tools” in The Big Black Book of Income Secrets.
The offer entices you with a “risk-free 60-day trial subscription to the Palm Beach Letter.” If you’re not satisfied before the two-month trial is up, you’re told you can get a refund and keep the book and some “bonus” reports that are included in the offer.
To find out if The Big Black Book of Income Secrets lived up to its promises, we signed up for the “Platinum Subscription” for $99 for the first year, which comes with additional “bonus” reports.
Three weeks later, the book arrived, containing 22 (not 30 as promised) strategies, with a cover letter from the Publisher, Tom Dyson, explaining that we could log into their website to access the reports we signed on for and back issues of the Palm Beach Letter. (I guess for $99, they can’t afford to mail you hard copies of the reports.)
The First Red Flag in The Big Black Book of Income Secrets is “Income For Life”
[Read more…] “What’s In “The Big Black Book of Income Secrets”?”
You probably already know – or at least strongly suspect – that Wall Street is rigged. And not in favor of the little guys and gals like us.
But this blog post should lay any doubt about that to rest…
Let’s start with the movie you must see if you have any money invested in the market (or need a reminder of why you yanked it out in the first place).
The Big Short is based on the New York Times best seller by Michael Lewis. The main characters are played by Brad Pitt, Ryan Gosling and Steve Carell.
It recounts the story of a handful of Wall Street traders who (ultimately) made a fortune by betting against the mortgages that caused the housing bubble… and subsequent crash and Great Recession. [Read more…] “The Movie You MUST See If Your Money is in the Market”
I have an important question to ask you…
When do you think the Dow will hit 35,000?”
Does that seem like a crazy or dumb question? After all, the Dow closed 2015 at only 17,425. It would have to more than double to get to 35,000. But it’s not a dumb question. I’ll explain why in a moment.
For the last five years, we’ve been tracking the Dow Jones Industrial Average and what that number means to you in your real life.
Sure, the Dow has gone up and down, and it’s gone up more than it’s gone down. But is it up enough to actually give you a return that justifies after all the sleepless nights and stomach-churning highs and lows?
Then there’s inflation. Has the market, as measured by the Dow Jones Industrials, even kept up with inflation? [Read more…] “Why you need Dow 35,000 today”