The Generals

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I recently finished reading the book “Brothers Against Brothers”, (History of the Civil War). It tells the story well, and in great detail. The book left me with all kinds of feelings and observations. The most disturbing was the overwhelming tragedy of so many lives lost. Historians estimate there were approximately 630,000 deaths. More American lives were lost in this epic engagement than the two world wars combined. In addition hundreds of thousands of men went home handicapped for life with missing limbs and suffering from the mental anguish brought on by the horrors of war.

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The False Premise of Diversification

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Just diversify across asset classes and you’ll be protected from all potential harm. Or so the story goes from Wall Street, and the many Wall Street minions across the brokerage world.

Just buy a smattering of stocks and/or mutual funds, hold for the long term, and all will be right with the world, and your financial security.

Everywhere I turn it seems the same old story continues. Diversification, Buy and Hold, Modern Portfolio Theory, the beat goes on and on.

Have they all forgotten the two devastating bear markets of the last 10 years? Are they not aware of the hopes and dreams that have been dashed, retirements postponed, net worths crushed? Read the rest of this entry »

A Road Well Traveled

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2/8/10

Are we destined to go down that same road, the road traveled by Japan over the last 20 years.

As you probably know the Japanese stock and real estate bubbles preceded ours by a few years, and they’ve been mired in a no growth/slow growth economy ever since.

Could it happen here? Is it already happening? Certainly questions no one can answer with certainty. The real question is are we ready for such a scenario? What steps can we take to handle and even prosper from such an outcome? Read the rest of this entry »

The Bull is Back!

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9/16/09

Yes, the bull is back! I believe we are in the early stages of a new bull market. Even with all the bad news still on the table, this bull is showing some sturdy legs.

It has finally moved up after a near free fall from late 2007 to it’s current up position. This to me signals a new bull market, and it’s time to buy. Read the rest of this entry »

The Stock Market Bull is Back, Not!

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6/4/09

Even though the stock market has rocketed skyward since the March lows we remain in a ‘Bear’ Market. You may be wondering how I can be so certain. After all, hasn’t the market risen 35% or so since the March lows? The answer is yes it has. But some of the key indicators have not yet turned up enough to signal the resumption of a new ‘Bull’.

One of the important indicators I use to help manage risk is called the 200 day moving average. I’ve analyzed it back to the early 1970’s and it has demonstrated a high degree of reliability in signaling the beginning and end of both Bull and Bear markets. Not infallible, but reliable.  Read the rest of this entry »

Market Timing is Not a Dirty Word(s)

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Many people, professionals and amateurs alike, believe in the old adage, ‘Buy and Hold for the Long Term.’ They believe once your investment program is in place you should not make changes due to market declines, even when those declines are as severe as they’ve been the last 13 months.

Just about all investment markets in the world have cratered 40% or even more over that 13 month period. The Dow Industrials, S&P 500, and NASDAQ stock indices are off 31%, 37%, and 42% respectively from January through late November 2008! I believe these losses, even though temporary, are too great for all but the most aggressive investors to endure. There has to be another way, a way we can reap the returns the markets have to offer without putting ourselves at risk of suffering these unbearable losses.

In fact, there is another way. The strategy we use is what I simply call ‘Trend Tracking.’ With Trend Tracking we don’t try to predict which direction the market is going next, or when it may start a new trend. We simply allow the markets to show us, and then we act accordingly. If the market is in a long term uptrend we simply get on board with the purchase of appropriate stock ETF’s and/or No Load mutual funds. If the indicators we track clearly illustrate a long term and deep ‘Bear Market as they have since January of this year, then we sell those stock ETF’s and No Load funds and move to money market and other safe havens.

Even though we hesitated this year and sold our stock funds in stages, we have for some time been in money market, treasuries and gold for our clients’ accounts. These maneuvers have protected our clients significantly as our losses are modest year to date. We are not only preventing further losses but are actually reaping modest gains over the last month or so.

An important but often overlooked aspect of prudent money management is protecting our nest egg from the severe downturns that occur on a regular basis. We have experienced two such downturns in just the last 8 years. Many people lost so much from 2000 – 2002 they’ve just recently recovered those losses and now they’ve been clobbered by the latest ‘Bear’.

Some say we will miss the big recovery when it comes. They say you have to be in the market in order to participate in the big early gains. Yes, we may miss some of those early gains. But I believe it’s far more important to be in safe harbors when the serious ‘Bear Markets’ are on the rampage. When the markets begin a new long term uptrend we will have ample time to recognize it and buy our favored funds. We don’t have to necessarily own those funds in the earliest stages of the new ‘Bull’.

In the last 25 years there have been 21 positive years as measured by the S&P 500, which means just 4 down years. But some of those down years were killers, ranging from a modest loss of approx. 3% in 1990 to a whopping 22% in 2002, and a horrendous loss of 37% this year alone! These are not the kinds of setbacks the prudent investor can afford.

The very same indicators that flashed a ‘Bear Market’ signal early this year will at some point flash a new buy signal. We will keep our capital safe and await that signal.

 

Steve Hood builds and manages “All Weather” no load mutual and exchange traded fund investment portfolios.

“All Weather” => Consistent performance through good markets and bad, resistant to market declines.

 

Mauled By the Bear Market? 6 Steps to Financial Recovery

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9/2/08

Has your portfolio been savaged by this new edition of a ‘Bear Market’? Are you feeling there’s no end in sight and have no hope of recovering what has been lost? Well, there are solutions and I hope to offer a few here.

Make no mistake, we are in a longer term ‘Bear Market’ and there is no way of knowing when it will end. Having said that there are a number of strategies you can use to protect yourself, as outlined below.  Read the rest of this entry »

A Reverse Mortgage May Have Saved Her Life

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Margie was a vibrant and active woman, younger in spirit and vitality than her 76 years would seem to indicate. But problems were mounting, life was closing in, and Margie was just about at her wits end.

You see, Margie’s beloved Bill had died some years ago, and his generous pension died with him, as it did not pay a spousal benefit. To compound Margie’s financial problems, due to Bill’s death her social security income was greatly reduced as well. Read the rest of this entry »

Beware, The Annuity Salesman Cometh

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7/15/07

Be on guard, for the annuity salesman cometh, and he/she is poised to take advantage of you, your lack of knowledge, and yes, even your fears.

This breed of salesperson is most often seen at luncheon and dinner seminars, which are marketed heavily to retirees, for retirees have the money. As the infamous bank robber Willie Sutton, when caught robbing banks for the umpteenth time, was asked why he continued to ply his trade, Willie purportedly replied, “…because that’s where the money is.” Read the rest of this entry »

How To Tame The Big Bad Bear

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3/13/07

Is the next “Bear Market” just around the corner? Was the recent market correction a harbinger of things to come? No one can know the answer to these questions, but there are a number of steps each of us can take to prepare for the next Bear which, sooner or later, is surely on the way.

The preparation should begin now, whether you are a new investor, or have already amassed a sizeable portfolio. The objective is to protect it from the ravages of the bear as it emerges from its four year slumber. Read the rest of this entry »