The rate cut may be too late for the baby boomers ...
As many baby boomers are facing retirement, this recent meltdown in the stock market has put many in a precarious position. Money they had counted on for their golden years has quickly disappeared and will not likely return anytime soon.
To illustrate this point, a friend of mine recently sent me a chart which I would like to share with you. This charts shows that we may be going into a prolonged period of no growth in the overall stock market. The NASDAQ peaked at 5,132.52 on March 10th, 2000. The NASDAQ market is in many ways more important than the DOW, and should be considered more of a leading indicator. If that is truly the case, then we have been in a bear market for the last eight years.
If many stocks have lost 50% of their value, they must now go up 100% just to get back to where they were. If we are to assume that the stock market grows by 10% a year (and that is not a good assumption), then it's going to take at least 10 years for many of these stocks to reach the heights they once were at. Many stocks will never come back. I don't think we will ever see Yahoo trade anywhere close its all time intraday high of $500.13 (set January 4, 2000).
I expect to see a prolonged economic climate that is not conducive for stocks to move higher. However, there will be pockets of opportunity where certain markets and sectors will move higher.
All in all, this is not a rosy picture for either the US economy or the world economy. As I have said many times on this blog, these are trading markets and not markets to hold long-term. Witness our General Motors blog, and the fact that General Motors (NYSE_GM) is a scrambling to either avoid bankruptcy or to find a partner. The latest rumor is that they're looking at Toyota (NYSE_TM).
Trading throughout the balance of this decade and into the early part of the next decade is going to be the key to survival and for recovering the profits in your portfolio. We strongly recommend that you approach these markets with some level of expertise and knowledge of technical trading.
The future is going to be the future and we need to take advantage of every moment and prepare ourselves to be the very best we can be in whatever business or endeavor we are pursuing.
Every success in the future,
Adam Hewison
President, INO.com
Co-creator, MarketClub
21 (censored) years for the stocks to bounce back...
That is one long wait and for people above 40 who are buy and hold investors, their money will be tied up as they struggle through middle age and retirement.
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Sorry Barry. I just had to censor that one word, but I did appreciate the one * .
Best,
Lindsay Thompson
Director of New Business Development
INO.com & MakretClub
Is anyone considering non-correlated asset classes for their retirement account? Things like real estate, notes, or private stock.
If these kinds of things return double digits or at least palatable returns, would that not make sense to bring your portfolio back quicker?
Hi Adam,
Good grief! I'll be happy if the future is as rosy as pictured. I can see where a prolonged sideways market would be a heck of a lot better than what COULD happen.
Keep up the good work.
from the chart it looks like another 10 years of BEAR before a real turn around. The reality of earlier blow ups is different than now due to many other nations competing for markets that will be solvent and therefor buyers. The US has been priced out of many markets by a number of actions, some of them belonging to politicians and others belonging to labor being much better paid here than else where. These facts will play into the longevity of the BEAR.
It isn't important to decide whether the Nasdaq matters more than the Dow, nor is it significant that the Dow peaked last year. In the mid-1960's - early 1980's period in red the stock market hit a new high in 1973, but buy and hold wasn't very attractive. The market went nowhere and inflation cut the purchasing power of money by more the two-thirds. If this chart were adjusted for inflation the red zones would be even more discouraging.
Great post Adam. As I have stated in my blogs numerous times, buy and hold is dead. But as soon as the market comes back there will be no shortage of people willing to let someone convince them to park their money with them. What's that old cliche, "Those who do not know history, will be forced to repeat it". And they will.
Thanks again Adam for keeping us grounded during these crazy times!
to say that "this rate cut might not do much for baby boomers" is not just an understatement, it completely ingnores the reality that government policy amounts to exterminating them while wearing a smiley-face; the real "rate-cuts" are the rates they get on savings- virtually nothing(and negative, adjusted for inflation), and any adjustments to their SS payments likewise.
Anyone who does not see that real policy is the elimination of "useless eaters" either has no elderly relatives or is a card-carrying member of the Axis-of-See-No-Evil
Robert,
Thank you very much for your feedback and insights into what is going on for the baby boomer generation. Very insightful.
Adam
is this chart adjusted for inflation? if not its probably worthless. Please explain how the nasdaq is more important than the dow and should be considered a leading indicator??? which i would also assume your saying its more important than the S&P????
CJ,
Thank you for your feedback. I'm not sure if the chart has been adjusted for inflation as a friend of mine sent it to me. I think it's also important to note that the NASDAQ was not around at the turn-of-the-century, nor was the S&P 500.
What's more important in my opinion is to see how very cyclic the expansion of capitalism and the contraction of capitalism is over time. The Dow which is comprised of 30 stocks has been continually adjusted over the last century in that certain stocks have been eliminated from this index and new ones have been added.
I hope this is addresses some of your questions and concerns.
Adam