Warning: This has happened 100% of the Time Before Major Stock Market Declines

For the sake of your retirement money, you might want to read this letter.  This is not meant to be a gloom and doom report.  This is simply a letter to you warning that it is important to understand what could be developing in the stock market.  ANYONE can understand what I am about to show you.  So, don’t stop reading because you think you will not understand.

Here is what you need to know:

The price of the stock market goes up and down based on the emotions of investors.  It is driven by fear and by greed.  As a result, a picture of the stock market today can look very similar to pictures of the stock market in the past.  Said another way, the stock market travels in patterns.  As a result, a pattern today could look similar to a pattern in the past.   

The picture below shows a pattern where the stock market just travels sideways between two lines.  What money managers are looking for is which direction will the market eventually travel?  After traveling sideways for a while, will it travel up above the top red line or below the bottom red line?

Since 1929, there have been 12 bear markets.  A bear market occurs when the stock market declines more than -20%.   5 of those 12 Bear Markets were major declines with one being a minimum of a -48% decline and the biggest one was a decline of -86%. 

Before each of these 5 major declines occurred, each of the 5 showed the same type of pattern. 

1929, 1937, and 1973

These three bear markets looked similar in pattern. In all three time periods, the stock market started in a sideways pattern then rose above that sideways pattern then started major declines. 

1929 –before a -86% decline

1937 –before a -59% decline

1973 –before a -48% decline

2000 and 2007

Before these two major declines, the stock market was in the same sideways pattern.  However, unlike the previous two patterns, these two patterns never rose above the pattern before the major decline.  They just fell below the pattern right into the major decline/bear market. 

2000 –before a -48% decline

2007 –before a -56% decline

What is the stock market doing today?

Does that mean that the stock market is about to turn into a major decline?  Given 5 previous examples, history would suggest that there is some degree of probability.  As Mark Twain said, “History doesn’t repeat itself but it does rhyme.”

Pretend you live on the coast of Florida and a meteorologist reported a weather pattern that has produced a category 5 hurricane several times in the past.  I would be on alert.  I would understand how much risk I was taking.  Finally, I would have a Plan B.  What is a plan B?  Well, you can read more about Plan B investing here.  You can also send me an email here and I can tell you how I navigate a Plan B strategy for my clients.  You can also call me at 972-386-0384 and we can start a conversation.

History would show that the stock market goes in and out of good cycles and bad cycles.  That is the world of investing.  The key is to prepare yourself and be ready. Wall Street will tell you just ride it out.  Why would you ride it out when there are alternatives?  It never makes sense to just sit there and take the brunt force of a major decline. 

Seek out your options and be prepared!  

Is the Government Forcing Money Market Accounts to Buy Government Bonds?

The only way to feed the 18 trillion dollar debt monster is to get people to buy more government bonds.  Well, the Government has figured out a way to do just that.  The SEC last year has introduced new money market reforms that will drastically change the way money markets work.

Money markets are a step up from savings account and represent the cash accounts at mutual fund and brokerage companies.  Currently, there is 4.9 trillion dollars in money market accounts.

The SEC’s “reason” for these new reforms is money market liquidity.  They want to prevent the same situation that happened during the financial crisis when investors pulled money out of money markets or where a “run” occurred on money markets.  So, they are giving mutual fund and brokerage companies the ability to impose restrictions on redemptions or imposing fees on withdrawals if retail money market levels get below a certain point. 

They are also going after the big institutional money market accounts.  They will allow the $1 per share to float.  What does that mean?  Your “safe” money in money markets could be worth less than what you originally put into the account.  Imagine if you put 1000 into a savings account and the next day it was worth $995?

However, there is one type of money market that NONE of these reforms will apply – money market accounts that are backed by US Government Bonds. 

This is how this works.  Companies like Fidelity that dominate the money market business will have to convert all of their money market accounts to Government Backed money markets.  They have to do it because of the implications of these new rules.  There are too many investment managers who use these money markets in trading and cannot afford to have them locked up or have fees applied.

The Government has no intention of paying off the national debt or stop spending money that they don’t have.  They are just going to get creative in finding ways to force people to buy government bonds.  I would predict it is just a matter of time before there is an option for 401 K holders to buy into government bond backed annuities.     

Rev. Creflo Dollar Needs a 68 Million Dollar Jet to Spread the Gospel

When I think I’ve heard it all, I hear this news story.  Apparently, the Rev. Dollar thinks that to fulfill the message of his ministry, he needs to buy a 68 million dollar luxury jet.

Earlier in the year, he posted a video called “Project G650.”  In the video, he encouraged his followers to pony up $300 each so that he could purchase it.  Supposedly they quickly took the video down according to the Huffington Post.  I easily found it. You can see the video here.  Basically, for the Rev. Dollar to go around the world “safely”, he needs that 68 million dollar luxury jet. 

His board supports him.  They made this statement in the published in the Huffington Post:

“A long-range, high-speed, intercontinental jet aircraft is a tool that is necessary in order to fulfill the mission of the ministry.  We plan to acquire a Gulfstream G650 because it is the best, and it is a reflection of the level of excellence at which this organization chooses to operate.”

Well, whether you pay for it with individual $300 gifts or not, offerings will eventually pay for the high priced toy.  Can you only imagine what 68 million dollars could do if put to use in ministry?

I know the missions team at our church travels all around the world by commercial airline and does very well.  However, this is about the prosperity gospel and God’s responsibility to make you rich. 

The prosperity gospel is about what we deserve as Christians.  According to the PG, God wants all Christians to be prosperous.  We are entitled to prosperity.  Material wealth is a sign of God’s favor.  That is pretty convenient considering the Rev. Dollar wants a 68 million dollar luxury jet.

I don’t have a problem with people in ministry acquiring wealth.  I do have a problem with them acquiring wealth at the expense of the dollars that were originally intended to be used to spread the Gospel.

Here is the reality of giving. God is going to bless you when you give.  Said another way, God is going to Bless you when you are faithful.  It is not up to you to dictate ahead of time what that blessing might be nor is the blessing the reason for giving in the first place.  The prosperity gospel has it all wrong. 

#prudentstewardship

Bob Brooks hosts the Prudent Money Radio Show heard weekdays Monday through Friday on 91.3, 97.5, and 99.9 in the Dallas Fort Worth Area. You can reach Bob at bob@prudentmoney.com

How Do You Invest if the Market Tanks? Wall Street’s Best Kept Secret

I remember watching the business channels during the financial crisis. One anchor says, “Everything is falling. No one is making money.  There are no investments that make money when the market is this bad.”

The reality with his statement is that it is just not true

Yes there were people losing money right and left.  Yet, there were ways to make money during the financial crisis.  You just had to be invested for it.

Virtually all investment strategies invest for growth.  That works great unless the stock market is declining.  Yes stocks and bonds work well as long as the market goes up. Those are your Plan A investments. 

Wouldn’t it make sense to bring in Plan B investments when Plan A is not working?

What are plan B investments?  Every investor should know that there are 3 main types of investments and not just 2.  Everyone knows about stock and bond investments.  However, there is a third category of investments that if used correctly can really work well when the market is tanking. 

Alternative Investments…

Alternative investments are intended to do the opposite of the stock market.  If everything was going down in portfolio, wouldn’t you want something going up?  Fortunately, these types of investments are not exclusive and available only to the wealthy. Anyone can invest in them. They are the best kept secret on Wall Street.  In fact, there is a whole category of alternative investment based mutual funds.

One word of caution – These funds have to be used correctly and must be managed from someone who has experience using them.  Just like anything else, gains are not guaranteed. Further, to make it even trickier, there are mutual funds that call themselves alternative investment funds and they are far from it.  You need a trained eye to identify which ones are prudent. 

In my own practice, alternative investments are a big part of my investment strategy. If your financial advisor or investment manager still lives in a 2 category investment world, I would love to talk with you about my beliefs about investing.  I am always looking to bring on new clients.  Simply call me at 972-386-0384 or email me at bob@prudentmoney.com.

Today, we live in a risky world where Plan A is just not enough! 

Is Texas the Best or Worst Place to Retire?

Most give thought to retirement in regards to income and life style  How about where you want to live and maybe where you don’t want to live.  Kiplinger’s Magazine last announced their ranking of the worst states for retirement from April.  Now it’s time for the good news. Kiplinger has ranked all 50 states and the District of Columbia to find the best places to retire, based on quantifiable data such as taxation, crime rates, and 65+ population size. Spoiler alert: the #1 state isn’t Florida.

Let’s take a look at the top 3 worst places to retire:

  1. District of Columbia
  2. California
  3. New Mexico

Let’s take a look at the top 3 places to retire:

  1. Delaware
  2. Florida
  3. West Virginia

Is Texas on the worst or the best list?  You can click through the links above to get the complete list. 

Bob Brooks hosts the Prudent Money Radio Show heard weekdays Monday through Friday on 91.3, 97.5, and 99.9 in the Dallas Fort Worth Area. You can reach Bob at bob@prudentmoney.com

Are You Using the Right Rewards Credit Card?

Most people take advantage of credit card rewards points in order to get free airfare and hotel stays.  Nextadvisors.com just released a very comprehensive analysis of reward card programs and ranked these programs.  The rank the top 15 programs for best rewards programs for flights, hotel stays, and best average flight and hotel stays.  They also give full details about each programs.

“NextAdvisor.com’s analysis used extensive research to determine an apples-to-apples dollar value of earnings from every type of program, making it simple for consumers to compare the best cards. The overall winner was the Barclaycard Arrival Plus™ World Elite Mastercard®, boasting the highest average rewards value. The Starwood Preferred Guest® Card from American Express came in with the highest hotel-only value and the Virgin America Visa Signature Card won the highest flight-only reward value.”

Check out the full analysis here

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