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IRRATIONAL MARKETS THEORY
For those of you who may not know, XEKE.com is owned and operated by two small business owners in Cuyahoga Falls. I own Myers Financial Resources, LLC (www.myersfinancialresources.com is currently under construction). I have studied capital markets for almost two decades. Before starting my own business, I worked for two of the largest financial services firms in the United States. I know the game- and believe me, it is a game. I know the sales tactics. I have been around the block. That is why I started Myers Financial Resources, LLC (MFR). I despised, and still do despise, the dishonest sales tactics, quotas, and at times blatant lies that far too many firms encourage and sales reps practice. Before I discuss my own theory, Irrational Markets Theory, I want to take a brief trip back in time. Late summer/early fall of 2008, before the global economy tanked, I warned of a looming financial markets melt down. I stopped soliciting investment business. I focused solely on life insurance products. A year or so ago, I officially put my investments licenses on hold with the regulating bodies. The focus of my practice is now life insurance, family budget consulting, and small business consulting. I have zero interest or intent on activating my investment/security licenses. I love investment analysis. I love digging into research, financial statements, and financial news. I am a complete finance (and political) nerd. I have spent over half of my life studying the U.S. capital markets. I am a classic technical analyst.
The Dow Jones Industrial Average (DJIA) is up approximately 10% in the past 12 months. The DJIA has gone from a high 14,006 (Bush Era) to a low of 6,626 (Obama Era), and back up to 11,491 (post-GOP Congressional Revolution). Even though the DJIA is up over 10% the past 12 months, we are still more than 2,500 points away from the 14,006 high in 2007. For those of you who do not closely follow the financial markets and economic indicators, please allow me to give a high level explanation of our current economic state of affairs. Our nation has record, runaway national debt, and the Obama administration continues to push for more regulation, more debt, and more spending. We have record high federal debt- levels that have never been seen in the history of our great nation. The U.S. dollar suffers greatly when politicians in Washington D.C. spend recklessly and irresponsibly. We are printing money at a record pace, and the value of the U.S. dollar is very weak and fragile. National unemployment levels are at a record high. Sustained unemployment levels of greater than 9% have lingering effects on the economy and financial markets. Many states face unfunded mandates, pension obligations, and wasteful legislation that many financial experts believe total more than $1 trillion. Let me say this again, because this is a very important statistic. There is over $1 trillion in debt that states have unfunded. Municipalities will default- not be able to pay their bills to debtors. Those debtors are banks, financial firms, and investors. You may have some of your own money invested in at-risk muni bonds via your 401k, IRA, or other investment vehicles. Oil is approaching $100/barrel, and the number could rise. We are still at war with radical Islamic nations that are hell-bent on killing as many Americans as humanly possible. Tensions are high between North and South Korea. Pakistan is volatile. The Middle East is volatile. The "Palestinians" want to eliminate Israel. China is Communist and cannot be trusted. Mexico is volatile- where drug lords run the country (good thing we do not have a border to keep our own people safe and secure). Greece is burning. Many European nations face riots and angst, as world leaders realize that overly generous public pensions, mandates, and entitlements have crippled their economies. Ireland: bail out. Greece: bail out. Is Spain next? How many more European nations need bailed out? Who bails out the European nations? Do you see where I am going with this? Irrational Markets Theory. Let me refresh:
Irrational Markets Theory. There is no reason that the DJIA should be up 10% over the past 12 months. There is no good reason to believe that the financial markets will increase anytime soon. What were once thought to be "safe," triple-tax-free investments, municipal bonds, are now at risk of default. The financial markets have a personality. They are moody at times. They overreact at times. They are seemingly humanistic, at times. That being said, why in the world would the financial markets show any sign of sustainable growth? There is no logical reason to believe that the financial markets will see sustained growth. If one, just one, of the previously mentioned geo-political risks worsens (see domestic Muslim attack, Korean War, municipal default, continued European bailouts), how do you think the markets will react? 9-11 destroyed the financial markets on a short term basis. Credit default swaps, and mortgage backed securities had a devastating affect on global economies and financial markets. Please take caution in any financial advice you receive. Please understand that the person advising your investment decisions makes money whether or not your investments grow. Please know that your investment rep makes commission on sales, or receives payment based on assets under management- again, either way, your financial services representative makes money- regardless of your investment performance. Again, I gave up my securities licenses. If you came to me with $1,000,000 to invest, I would not take your money. I would not activate my securities- I would walk away from the commissions. I have that much confidence in my Irrational Markets Theory. zm 12/20/10 |
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