Some thirty years ago, when I was in my twenties, friends of my then wife were in the investment business. They were smart, frugal and sincere in their belief that to live and retire well people should set aside some money and invest a good chunk of it in equities.
To drive home their point they gave me a business card sized, four-color graph of equity indices – similar to the one above – the Dow, the S&P, etcetera. It clearly showed that since the crash of 1929 stocks have gone up and down, but unlike a roller coaster, the trend was clearly up, up, up.
So, I invested the small sums I saved for retirement in stocks.
In the summer of 1987, my then wife was also friends with a woman who was married to the technical analyst Ralph Acampora. You may remember Mr. Acampora as one of the “elves” of the Louis Rukeyser days of the PBS television machine show “Wall Street Week.” He was often a featured guest.
At the time, I was a graduate student at New York University’s Stern School of Business. Mr. Acampora invited me to visit his “office,” which was actually a rather large walk-in vault. I don’t believe he or his partner ever closed the vault door. It was just space in the over-crowded, over-priced real estate market of Manhattan.
Inside the vault were graphs of every statistic known to man on clear plastic overlays. Placing one on top of another they searched for repeating patterns. Their job was to figure out what the market was going to do next.
From that surreal meeting I took away a single piece of sage advice: “The second you see interest rates go up, Charlie, bail-out of the market.” Back then bail-out meant get-the-hell-out, not get a hand-out.
In June of 1987 interest rates inched up. I sold my stocks. Ralph saved me a lot of money. I got back in the market in January 1988. After that, my luck ran out, in a number of different ways.
Question: Why?
Take a look at that chart again and the trajectory of S&P stocks prices. Up, up, up. The S&P needs to lose a whole bunch more before we’re back down to 1995 prices.
Answer: You and I are not the S&P 500.
Further: You and I, and people like us that must work for a living, have no business in the equities markets. Not in individual stocks. Not in mutual funds. Not even in a broad index fund like the S&P 500, which is most likely the best way to “invest” in equities.
Here are a few, just off the top of my head, reasons why:
In the face of all this, where should you put your money? A contributor to the Motley Fool said, “my recommendation is to focus on the highest-quality segment of U.S. corporations."
What would those be? As we have seen, no corporation, of whatever historic quality, is capable of protecting their assets in a consumer/worker slaughter-driven market dive.
Also, how can any small investor get a "fair" return relative to risk with the current situation of trade skimming and who knows what other black box scams?
Any rational investor opted out months ago and is waiting for the storm to pass and the enforcement of necessary regulations to create a market situation where the odds of success can be determined; where risk can be reasonably determined.
The current market is untenable. The only people participating are either: a) ignorant of the circumstances, b) blinded by greed or, c) the same operatives of Big Greed pulling the levers of this the biggest con of all time.
If I haven’t convinced you to sell your stocks, good luck.
If I have, now is a great time to sell, as this current bubble will soon burst. Put your cash in an insured account. Don’t worry about the paltry earnings rate. Anything is better than the rigged casino they call Wall Street.