Brackish Investors and Their Impending Doom

Small Investors never learn.  This time the result could be much worse than anyone has imagined. 

During the past 26 years, the market and economy were in a longer term up-cycle as illustrated in the chart of the Investment Rate below.  Buying the dips, and buy and hold strategies work extremely well for passive investors over time during the up-cycles demonstrated in the chart.  Market declines are short-lived during longer term up-cycles too, and this eases many concerns; maybe too much.

The crash of '87, the Internet debacle, and all the short-lived down moves in between which occurred during this 26 year up cycle have made many smaller investors and passive money managers callous, thinking that 'holding on' will pay off forever, regardless of market conditions.

Not this time!  You can't just wait for it to come back. 

Without a doubt, market based investments will recover over extended durations.  But those extended durations can span life cycles.  For example, if you bought and held at the beginning of the first down period in the Investment Rate (see chart) it took 26 years to get whole, and mark to market Dow investments were down by 76% during that time.  The 2nd down period spanned 10 years, and 50% declines took place.

Given the aging population, most people don't have that long to wait.  Most other people would opt not to wait if they understood the severity of the current cycle.

The intention of this article is to remove the Brackish posture that still exists throughout the general investment community and to re-posture smaller investors to evaluate more proactive strategies.

Review this chart carefully:

Click to enlarge

What does this chart tell us?

1. The Market has already peaked.
2. The beginning of the 3rd major down period in history has already begun.
3. The 1st was the Great Depression.
4. The 2nd was the Stagflation period of the 1970's.
5. Significant declines lie ahead.
6. Buy and Hold Strategies won't work.
7. This period of economic weakness lasts until about 2020.
8. Move to cash or adopt proactive strategies.
9. Do not be afraid to take losses because they can get much worse.
10. Stop being Brackish, or like a stagnant pool of water your liquidity will evaporate into the wind.

I cannot drive this point home any harder.  Mistakes made during cycles like this can wipe smaller investors out completely.  Don't let this happen to you.

Click here to read more on proactive strategies.

Comments

[daytrader:]

mr.kee,
i started reading your articles in depth when you first commented about david tice from the prudent bear fund.i have also visited your website.bottom line.

YOU MAKE MORE SENSE THAN ANYBODY I HAVE EVER READ OR LISTENED TOO.YOU HAVE THE FACTS&OUTSTANDING PERFORMANCE TO BACK IT UP!AS THEY USED TO SAY ON DRAGNET JUST THE FACTS.MA;AM.

if anybody sincerly wants to make money they should take a look at mr.kee's website.just google thomas kee.it's just not his opinion;he has the track record to back it up.

GOOD LUCK,MR.KEE!

2008 Sep 16 11:10 AM

[notsosmart:]

does price really matter that much if the co. pays consistant good dividend?

2008 Sep 17 10:24 AM

[3201JQ:]

RUN FOR YOUR LIFE, THE SKY IS FALLING!!!

The fluffy meringue of stock valuations that was whipped to a froth by Wall Street sub-prime overleverage has collapsed with the first downdraft.

GET OUT! GET OUT WHILE YOU CAN...

What a marroon

2008 Sep 17 12:40 PM

[neeb??:]

more FEAR AND PARANOIA!!!!!
Slow down a tad. Take a deep breath and say this too shall pass.
And,oh yes, try to use the brain for more than an emotoinal charging machine please

2008 Sep 17 09:20 PM