Financial markets 2008

Welcome.
It amazes me how many people got caught with their investments dropping in Oct 2008. Did their investment advisor not see this coming? I did. I moved my clients to bonds and daily interest in 2007. They were told we would see 'at least' a 40% drop in North American stock markets during 2008 and 2009. It had to happen. It wasn't just a lucky guess - it was inevitable.

Many financial people appear to pass on the 'sales pitch' offered up by investment bankers, fund managers and politicians. Representatives don't seem to know that a fund manager is never going to tell us it is time to get out of equities now, if they did investment gurus would be fired in a minute because it could start a run on stocks. It's wise to stay invested for the long term except when we see a major systemic flaw coming in the markets. Systemic flaws cost you up to five years of your retirement plan. You can never catch up to someone who got out before the crash and bought back in after the decline in markets!

Every few years we see it. In 1989 Japan's banking system collapsed. Their stock exchange dropped from 39,000 to the teens. Black Monday in Oct 1987 markets dropped 22% because stocks were over priced, the Bre-X story was in 1990's, the dot.com craze of the late 1990's collapsed in 2001 and 2002, and now the sub-prime mortgage fiasco. You can suffer needless deep losses every five to ten years and each one wipes out from three to five years of growth. You never make up for getting out in advance and buying back in when it is low.

IT IS NOT MARKET TIMING: Market timing is reacting to daily, weekly or monthly fluctuations in the market and most people fail at that. Being alert to systemic flaws that build up over time and then implode requires you to keep your eye on the two to five year period ahead. No one knows what next week will bring, but with proper training and a certain talent you can reasonably predict the mid term market range.

Did you lose money this October?