Showing posts with label wealth. Show all posts
Showing posts with label wealth. Show all posts

Thursday, January 9, 2020

Making Money Investing Should Not Be This Easy (or maybe it should be)

Since the Great Financial Crisis (GFC) of 2007-09, the performance of the major indices have been nothing short of miraculous.

At the nadir of the crisis, the bottom, on March 9, 2009, the Dow Jones Industrial Average stood at 6,547.05. It closed Wednesday at 28,745.09, an tidy increase of 439%. Nearly 11 years later, that's an average annual return of 39.9%, or, for the rounders amongst us, 40 percent per year, on average.

Imagine, a $100,000 investment right at the bottom of the market would be worth $439,000, and that's just on 30 stocks that comprise the Industrials, without adding in dividends, which could have been reinvested and made even more money. It's absolutely ludicrous that such an easy investment strategy - buying and holding an index fund, for instance - could generate such awe-inspiring returns. That gain of $339,000, or, $30,818, non-compounded, is more than most Americans make in a year. Incredible.

What this shows is that anyone who had a retirement fund and didn't touch it during the crash of 2008, is probably pretty smug and comfortable right about now. Such people would be mostly Baby Boomers, people born between 1946 and 1965, who were, in 2008, as old as 62 or as young as 43 and are now between the ages of 54 and 73.

Many from this age group have already retired. Some are headed that way, and, if the market holds up, many will take early retirement at age 62, if not sooner (59 1/2 for those with IRAs or 401k plans). This is an enormous portion of the population, about 23% of all the people (legally) living in America.

Now, not every Baby Boomer had 100,000 in their investment account in 2008. Some had more, some had less, some had none, but, without a doubt, there are some very fat and sassy old folks out there, hoarding their gains, figuring out how long their money will last if they start withdrawing a little here, a little there, mostly more or less on a plan to live until they are 85 or 90, because that's the general life expectancy these days.

All of these people will also collect Social Security, adding anywhere from $400 (slackers) to $2,788 a month to their income. There's a lot of money out there, much of it still being invested.

While this all sounds like economic Nirvana, there is one no-so-small caveat. In a word, it's inflation. In more words, it's the cost of living. Everything is more expensive today than when the Baby Boomers began investing, so it's eroding their profits, though they're still pretty well off, because, as young people will learn and older folks already know, costs of living (outside of severe medical expenses) are lower when you're older. You eat less, go out less, need less of everyday items because you already own them. You drive less, and, probably, you save more.

Even discounting the effects of inflation (a new car in 1970 could be purchased for less than $2000; today's it's generally more then $20,000, often much more), these Baby Boomer retirees are going to be pretty well off, even if Social Security runs out of money and is forced to reduce benefits.

As much as people today bemoan the great inequality of incomes and wealth, this one group, Baby Boomers, were born into and continue to live in a pretty sweet spot, when the economy was good, if not great, and life in the United States of America was one of general peace and tranquility. America is still a very solid country in the grand scheme of things, and maybe the complainers and nay-sayers could do themselves and everybody else a favor by working just a little bit harder, saving just a little bit more, complaining just a little bit less.

Nobody can predict the future, but who knew, 11 years ago, that American stocks would provide so well?

Millennial food for thought.

At the Close, Wednesday, January 8, 2020:
Dow Jones Industrial Average: 28,745.09, +161.41 (+0.56%)
NASDAQ: 9,129.24, +60.66 (+0.67%)
S&P 500: 3,253.05, +15.87 (+0.49%)
NYSE Composite: 13,934.44, +36.00 (+0.26%)

Thursday, March 15, 2018

Dow Sheds For Third Strat Day; Last Week's Gains In Jeopardy

Trade wars. Inflation. Rate hikes. Housing prices. Wealth inequality.

Take your pick. These are but a few of the issues vexing investors as the Dow Jones Industrials recorded triple digit losses for the third straight session, wiping out the gains from the previous Friday and threatening to eviscerate all of the upside from a momentous prior week.

Anybody keeping score (and if you have a pension plan, college fund, or any other kind of tangential reach into the world of equities, you should be) has to be at least a little bit alarmed at the inability of stocks to regain their momentum. After a wildly positive January, February was fraught with panic and pain. Now March is beginning to shape up into a further continuation of the slippery slope upon which stocks are currently sliding downward.

Over the previous week, the Dow had ramped up nearly 800 points, but, as of the current mid-week, the blue chips are down nearly 600 points. Another day like Wednesday would not only eclipse the gains of last week, but it would also signal to chart-watchers a breach of the prior interim low, 24,538.06, achieved March 2nd.

A drop below that level would be an almost certain sign that the index - and stocks in general - are in for another round of relentless selling pressure. What matters little is the suspected cause. What matters most is the evaporation of profits and gains and the spread of fear in the accumulation of wealth.

It would not be the first time that investors had been hoodwinked by snake oil salesmen promoting a path to easy street via investments in minuscule percentage ownership of gigantic corporations. In all likelihood, it would not be the last.

As has been stated in prior posts here at Money Daily, the market is moving not only on money flows and fundamentals, but on political considerations, whether they be real or imagined.

There is very real danger at this juncture and investors would be wise to hold cash and/or take profits.

Dow Jones Industrial Average March Scorecard:

Date Close Gain/Loss Cum. G/L
3/1/18 24,608.98 -420.22 -420.22
3/2/18 24,538.06 -70.92 -491.14
3/5/18 24,874.76 +336.70 -154.44
3/6/18 24,884.12 +9.36 -145.08
3/7/18 24,801.36 -82.76 -227.84
3/8/18 24,895.21 +93.85 -133.99
3/9/18 25,335.74 +440.53 +306.54
3/12/18 25,178.61 -157.13 +149.41
3/13/18 25,007.03 -171.58 -22.17
3/14/18 24,758.12 -248.91 -271.08

At the Close, Wednesday, March 14, 2018:
Dow Jones Industrial Average: 24,758.12, -248.91 (-1.00%)
NASDAQ: 7,496.81, -14.20 (-0.19%)
S&P 500: 2,749.48, -15.83 (-0.57%)
NYSE Composite: 12,762.67, -69.08 (-0.54%)

Thursday, June 2, 2016

Wealth Building Suggestions In The Age Of Idiocy

Here are some pretty simple ideas for building and preserving wealth. When it comes to debt, not all is bad, though excessive debt is a non-starter for most people. Manage debt wisely. Any business will tell you they needed a loan or an equity partner to make money; people aren't very different.

Here are a few suggestions:
1. Buy silver (dollar cost average; buy a certain amount, be it $20 or $2000, per month, regardless of price.
2. Hide silver (self-explanatory) and don't touch it. This is your secret stash, outside the govenment's hands.
3. Find a business you can operate from home, even if it's a little more than just a hobby. Deduct all allowable expenses. I've been telling people to do this for years and the number who have listened and done it approaches ZERO. The tax code makes it easy to deduct substantial portions of your expenses.
4. Read "The Richest Man In Babylon." Follow the book's advice. Here's's a PDF online.
5. Never buy prepared foods at a grocery. Total junk, and a huge ripoff. Cook meals at home.
6. Have a garden. Even a 6x6 garden can produce a significant amount of produce.
7. Never stop learning. Knowledge is power.
8. Spend money like you don't have much. Always ask for a discount or deal.
9. Never, ever hire an investment advisor. If you think you don't know enough about investing, see #7 and educate yourself. The fact that you are reading this post makes you a candidate for being your own investment advisor and money manager.
10. Be a Boy Scout. Their motto is "Be Prepared."
11. Never panic, in either buying or selling situations. Trust your gut.

There are many more...

As far as the markets are concerned, Thursday was a repeat performance (by agents of central bankers) of Wednesday, with early losses rapidly erased and the major averages making a diagonal line from lower left to upper right on the charts.

Truly disturbing behavior from some exceptionally disturbed people.

S&P 500: 2,105.26, +5.93 (0.28%)
Dow: 17,838.56, +48.89 (0.27%)
NASDAQ: 4,971.36, +19.11 (0.39%)

Crude Oil 49.15 -0.04% Gold 1,213.10 +0.04% EUR/USD 1.1149 -0.04% 10-Yr Bond 1.81 -1.90% Corn 414.75 -0.12% Copper 2.07 +0.17% Silver 16.00 -0.16% Natural Gas 2.78 0.00% Russell 2000 1,170.58 +0.65% VIX 13.63 -4.01% BATS 1000 20,677.17 0.00% GBP/USD 1.4405 -0.10% USD/JPY 108.9500 +0.08%