Is it time buy stocks again? Your 401k that became a 201k back in 2008 has fully rebounded and folks are pretty ecstatic about this remarkable recovery. But now that we are “back,” is it time to jump with both feet back into the proverbial investment stock market ocean?
May 2013 ended with historically unheard of performance in the stock market but at what cost? Jack Bogel (the founder of Vanguard group mutual funds) warns that a 25-50% sell off is probable, Ed Yardeni calls this the mother of all melt-ups and El-Erian, PIMCO CEO of the largest Bond Portfolio Manager in the World, reports it is time to walk away from the stock market.
Why would these widely successful oracles of the markets all be so negative? Well for starters last week, the “common man’s” barometer to our economy represented by three of our countries largest retailers that sell to employers, construction industry and consumers including Target, Lowe’s and Staples; all reported disappointing earnings and warned about lower profit forecasts in the future.
Worrisome also is a report from U.S. Trust, publishing its “Insights on Wealth and Worth” survey. According to them, the wealthy are still holding mountains of cash. Their survey found that 56 percent of “the wealthy,” hold a “substantial” amount of cash. Only 16 percent of them plan to invest that cash in the next couple of months. And only 40 percent plan to invest it over the next two years.
“Let’s not lie to ourselves about where the market is. There are only so many options on where to put your money,” Cuban, adding, “In the land of the blind, the one-eyed man is king.”
Are we being to pessimistic? Maybe, but here is our Top 5 list of what concerns us most about the stock market and your investments, retirement plan or IRA:
1. Investors and traders are increasingly buying stocks with borrowed money.
Note the past times when margin debt out paced the S&P 500 index, a major sell-off occurred, including the mother of all crashes, Black Tuesday crash in 1929, setting off the Great Depression
2. Stocks are now outpacing inflation expectations at a rate that preceded that last two crashes.
3. Stocks are expensive relative to 10-year average earnings. This ratio, popularized by Robert Shiller, is above 23, which is much higher than the long-term average of 15.
4. The gold-silver ratio has dropped, which signals a risk-off trade is coming.
Historically this indicator has a 71% correlation (chance of being accurate) that indicates the S&P %00 index is headed for a major decline
And drumroll please…
5. The markets are almost “euphoric,” which is the mother of all contrarian indicators.
Add to these top 5 reasons to be wary, lowered outlooks for corporate earnings and pressure on increasing wages (Seattle, WA: most of all the fast food workers are striking today 5/31/13 and demanding a $15 per hour minimum wage); and we have the makings of a perfect storm for the stock market.
Many of the Worlds top economist are scared to death of what appears to be a looming threat of hyper inflation and 99% of all economists warn of massively higher interest rates across the board. Your money and investments need to be insulated (as much as possible) from these economic zombies at our gate. You need to have some type of insurance or bank or financial institution, protecting your wealth and principal using an annuity or annuities.
Even Ben Bernanke, the most powerful and influential money person in the World, owns annuities in his personal wealth portfolio!
If you or your loved ones or friends have investment accounts, IRA’s, 401k’s or 403b plans that are unprotected, please heed this warning. It may now be the time to consider a IRA rollover into a protected growth investment.
Seek the advice of a proactive, protection first Dallas or local investment financial advisor. As famed investor Warren Buffett says, be fearful when others are greedy and greedy when others are fearful. Best money help and tip ever issued.