Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Natural Gas Sets Up Bottom Pattern - 26th June 19
Has Gold Price Broken Out Or Not? Technicals And Fundamentals - 26th June 19
Stocks and XAU Gold Miners Next Bull and Bear Markets are Now Set Up - 26th June 19
Gold Price Trend Forcast to End September 2019 - Video - 25th June 19
Today’s Pets.com and NINJA Loan Economy - 25th June 19
Testing the Fed’s Narrative with the Fed’s Data: QT Edition - 25th June 19
What "Pro Traders" use to Find Profitable Trades - eBook - 25th June 19
GDX Gold Stocks ETF - 25th June 19
What Does Facebook’s LIBRA New Crytocurrency Really Offer? - 25th June 19
Why Bond Investors MUST Be Paying Attention to Puerto Rico - 25th June 19
The Next Great Depression in the Making - 25th June 19
The Bad News About Record-Low Unemployment - 24th June 19
Stock Market New High, but…! - 24th June 19
Formula for when the Great Stock Market Rally Ends - 24th June 19
How To Time Market Tops and Bottoms - 24th June 19
5 basic tips to help mitigate the vulnerability inherent in email communications - 24th June 19
Will Google AI Kill Us? Man vs Machine Intelligence - 24th June 19
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

How to Profit in Any Kind of Market

InvestorEducation / Learning to Invest Jan 20, 2010 - 06:30 AM GMT

By: Money_Morning

InvestorEducation

Best Financial Markets Analysis ArticleKeith Fitz-Gerald writes: When it comes to the global financial crisis, many so-called "experts" think the worst is behind us. But I don't buy it.

And I'm not alone.


Just look at what some other big-name investors - each also known for their independent thinking - are saying or doing right now:
  • Bond king Bill Gross is nervous and raising cash.
  • Author, commentator and global-markets guru Jim Rogers has repeatedly said that he's not investing in stocks anywhere in the world right now.
  • Hedge-fund heavyweight John Paulson is moving aggressively into gold.
  • And investing icon Warren Buffett - never one known for tipping his hand - is candidly stating that the U.S. financial-crisis cleanup is far from complete. The fact that he's reportedly buying more shares of Korean steel dynamo Posco (NYSE ADR: PKX) would punctuate this point.

Indeed, entire nations - I'm thinking specifically of China, India, Brazil, Chile and one or two others - are adopting similar stances. And they're doing so for the same risk-fearing reasons. They want to grow their money but they don't want to place it at risk any more than we do.

This kind of uncertainty can be paralyzing, making it tough to decide where - or even if - we should deploy our investments.

Fortunately, we've been here before. And what we learned will allow us to profit no matter what the financial future holds for the U.S. marketplace.

Using Past Losses to Zero in on Future Profits

A decade ago, in the middle of the euphoric ardor of the dot-com bubble, I warned that we were following in Japan's footsteps and risking a repeat of that country's "Lost Decade." A balanced approach to investing was the key to success, I said, and value and dividends would win out over growth in the decade to come.

The U.S. stock market had become a giant casino - but one in which everybody won - so my warnings were ignored, and even ridiculed, by the "tech-savvy" investing set, whose members said I was out of step with the Brave New World of the World Wide Web. Never mind the fact that I have lived in Japan and spent nearly 20 years in Asia.

We all know how this turned out.

In 1999, if you'd followed the masses and invested $100,000 in the Standard & Poor's 500 Index, you'd have incurred an average annual loss of 1.1% - leaving you with only $89,000 for 10 years of work.

Had you taken that same $100,000, and invested it using a simple stock/bond split (60% in stocks and 40% in bonds) - maintaining that ratio by rebalancing the portfolio every Dec. 31 - you'd have reaped an average annual return of 4.3% for that same 10-year stretch and ended the decade with $300,500, according to a recent study by The Vanguard Group Inc.

There's a message here. Not only is it very clear, but it's one we repeat frequently: successful investing isn't about "buy and hold" - it's about "buy and manage."

"Buy And Manage" Your Way to Long-Term Wealth

"Buy and manage" is an investing mantra that's near and dear to my heart for a couple of reason.

First, it forces you to take profits. Most people think this means to "buy low and sell high," but that's not the case. Rebalancing forces you to "buy lower and sell higher." It also helps tame two of the most costly human characteristics - fear and greed - by instilling a level of discipline that helps you make the right decision at the right time.

Most investors do the reverse: They fall prey to their fears, and sell at market bottoms, and ahead of rallies that could have saved them; and they give in to greed and buy in at market tops, just before the indices reverse course and head for the cellar.

There's another benefit, too, and it's one that most investors fail to consider. Because rebalancing forces you buy in at lower lows, it can help position your money for the next big rally. For instance, we began urging investors to rebalance their portfolios early last year to take advantage of the run in bonds and abnormally beaten down stock prices.

Second, buy-and-manage investing forces you to properly concentrate your assets so that you maintain your game plan even as different investment choices move in and out of favor with investors.

Third, managing your assets - even if that "management" is limited to simple rebalancing - can help you to automatically tap on the brakes at a point when other investors are skidding out of control and toward a ravine.

I talk to thousands of investors during the course of a year, most of them at the many conferences that I appear at all around the world. And I still find it surprising that - even after the dot-com (2000-2001) and banking-crisis (2008-2009) investing debacles that were largely Wall Street engineered - investors continue to believe that buy-and-hold investing is a legitimate strategy.

It isn't: It's a marketing gimmick that was created by Wall Street. It's proxy for a complete lack of personal accountability, especially when it comes to the sweeping bull markets that are propelled by nothing more than abnormally low interest rates, debt and marketing hype.

In this post-financial-crisis environment, the winners will be those who learn how to buy and manage their assets. The game has changed forever, and investors who fail to change with it and understand the new rules will once again find themselves left behind - after their assets have been eviscerated for a third time in recent memory.

One key new rule is to view earnings statements with skepticism. For decades, stock prices have turned on earnings reports. But let's face it, at their most basic level, earnings are really just a bookkeeping entry. Accounting rules allow for all sorts of shenanigans. And we all know that corporations "manage" their earnings, pulling profits from a future quarter to "save" a current quarter, or pushing "excess" current profits into a future quarter to "save for a rainy day," so to speak. Years ago, a former Wall Street chief financial officer told me confidentially he could push earnings as much as 5% in any given quarter - whether he wanted to do so or if The Street "needed" him to do so.

If earnings can be manipulated that easily, it's no wonder that some of this financial tomfoolery led to the greatest loss of empire in modern history. What I mean by that is that America went from having the world's strongest currency and being a force to be reckoned with to the world's single largest source of debt and a liability for every single one of our trading partners. Bear in mind that this happened despite one of the most powerful stock-market surges in U.S. history.

Although we still use earnings in a limited way, tomorrow's markets will require other quantitative and qualitative metrics that we can use and trust as we evaluate a company and its stock - including certain "balance-sheet" attributes that I recently wrote about.

This shift to other metrics makes sense on a personal note, too. Fueled by rising home prices, rising incomes and cheap money (there's that cheap-money thing again), credit rose, too. So millions of people acted like they had their own personal piggy banks and bet the ranch when they should have been tending the farm. Adding insult to injury, our regulators not only failed to take away the punchbowl, but they actually poured in some financial moonshine, liberalizing the once-strict laws and regulations that could have prevented this financial disaster from happening in the first place.

Not to be left out, Wall Street created some "innovative" financial models that were really nothing more than fancy accounting and badly calculated risks. And the U.S. Federal Reserve watched blithely from the sidelines and actually refused to take action several times.

Meanwhile, back in the corporate world, low rates meant that earnings rose because debt cost less and the banks - here we go - fell all over one another in the bid to loan these companies more money. That's how the concept of "leveraged assets" came into vogue. It was all about "OPM" - Wall Street parlance for "other people's money."

Four Rules to Rule the Future

We've clearly come full circle, and run the risk of repeating past mistakes. That's why I am advocating careful, measured investment moves. It's why I'm also telling investors to dump "buy-and-hold" (a.k.a. "buy-and-hope") investing strategies in favor of the afore-mentioned "buy-and-manage" philosophy.

Following a 60% rise off of the early March lows, many investors have dropped their guard, relieved that the worst is behind us.

Don't you believe it. In fact, allow me to leave you with four solid strategies that are tailor-made for the uncertain times that history suggests are certainly still to come:

  1. Concentrate Assets: The best investors know that the composition of their holdings matters more than the selection of the individual holdings, which is why they spend inordinate amounts of time making sure their money is not spread willy-nilly all over the place. I'm not and it is not conventional diversification which doesn't, as many investors found out the hard way, work when everything goes down at once. The simplest way to achieve this goal to make sure your portfolio is set to the 50-40-10 proprietary allocation that we recommend in The Money Map Report, our monthly advisory service. That way you'll be forced to tap on the brakes if the economy falters again, but will still able to grow your money if the U.S. marketplace defies the odds and continues to chug along.
  2. Stick With Quality: Make sure you've got a healthy dose of "balance sheet" businesses with high global cash flow, globally recognized brands and strong access to credit. We're bullish as long as the Fed doesn't ask us to pay the bill. Whenever possible chose companies meeting these criteria that have Price/Earnings (P/E) ratios of 12 or less. That tends to present you with stocks that have more upside than down. Add to positions on really bad days so that you're maximizing each dollar you invest.
  3. Explore New Territory: Integrate hard assets - such as commodities and currencies - even if you have never considered them before. That way, if the going gets tough and the 14 trillion reasons for inflation (the dollar measure of U.S. federal debt) that we believe could come home to roost, you'll have the intestinal fortitude to ride out the rough times. And the profits you'll have in hand will put you in a much better position, especially when you realize that most investors have been taken to the poorhouse - again.
  4. Accede to Asia: Near-term bubble or not, China's on track for an unprecedented 700% expansion in gross domestic product (GDP) over the past 30 years and over the long haul will prove to be the greatest wealth-creation opportunity in history. Double your exposure to this region. The proper combination of protective stops and a few choice stocks can help you capitalize on the what will undoubtedly be the biggest profit opportunity of our lifetimes.
[Editor's Note : Twenty picks. Twenty winners. For the past year, Money Morning's Keith Fitz-Gerald has maintained a perfect record with his Geiger Index advisory service. Every trade turned a profit. That's remarkable in any market, but given the current circumstances, the service offers unparalleled security and profit opportunities. To find out what other investors have to say about the service, as well as the secret ingredient that makes the Geiger Index go, read on.]

Source: http://moneymorning.com/2010/01/20/stock-market-profit-secrets/

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Zahlen
23 Jan 10, 09:15
Buffet

Buffet says "the recession is over" -he said that like in November..


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules