By Al Thomas
We are in a bear market.
Yes, I know the market averages have been going up since 2009, but look at your 401K or other long term retirement/savings portfolio. Since the year 2000 has it been increasing? Then subtract the additions made during that period and look again.
In almost every case I have seen the total amount is less.
Financial history documents there have been 16 to 18 year bull and bear cycles going back more than 100 years. I have pointed out the bull cycle that started in 1982 and called the end in 2000. For anyone invested in one of the major mutual fund indexes such as the DJIA or the SP500 with a buy and hold philosophy this has been a loss of principal.
Why do these cycles repeat?
There are one or more of these 5 sins committed by the central government.
1. Tax increases or decreases.
3. Regulation increases.
4. Monetary policy mistakes
The basic cause of these mistakes is they reduce returns on invested capital. Corporations make less money which reduces expansion and hire fewer people. Their asset values are reduced and the entire economy slows.
When a corporation stops growing and makes less money its stock stops going up. That is where almost all of the money in retirement accounts is invested. Since 2000 there has been a slow and steady increase in regulations and taxes of all kinds. The more money siphoned off to government the less is left for growth of the economy. It takes money to make money. Government only spends.
The latest nonsensical verbiage from Washington is “government investment”. That is another way of saying more taxes. Show me one government program that makes money. There isn’t even one.
All 401Ks are in the grip of #1 and #3 which will continue to shrink the return for investors. But people are seeing the major averages go up. Why? This is an illusion caused by the excessive printing of fake (fiat) money by the Federal Reserve (which is neither Federal nor has any Reserves).
There is no place for this fake money to go except into stocks because they seem to be giving a better return than bonds.
Unfortunately more than 90% of mutual fund managers do NOT know how to manage (protect) client money. When the market started down in 2000 did your fund manager sell or did he hold and let you watch your funds disappear? How about the same question for 2008?
There is another problem that has not been mentioned by anyone yet. We all know Congress has stolen (that is the right word) the money us working people paid into Social Security. My fear is Washington is going to seize all 401Ks to “protect us” from the stock market cycles or some such excuse. Kiss your money good bye.
Every investor should have an exit plan. Don’t rely on a know-nothing manager.
If you don’t take charge what do you think your 401K will be worth in 2018?
Al's new ebook (32 pages) is available on Amazon for 99 cents. It explains the Golden Cross and the Death Cross. These are well known methods of determining long term trends in the market. If you only learned one method of technical analysis this would have kept you out of the 2000 and 2008 crashes and will keep you out of the next one that is coming soon. The title is Never Lose Money In The Stock Market Again. Copyright Williamsburg Investment Co 2013