For those who have ventured back into stock investing since the 'Financial Crisis of 2008', I invite you to read an excerpt from an email that I sent to a friend recently, and welcome your questions/comments.
You might recall the following paragraph from an email that I sent you in > Feb '09 (about three weeks prior to the change in trend): > >> In my study of the markets, declines typically occur in three waves. We've >> witnessed the first, which is even now trying to test the firmness of its >> temporary bottom. The recovery from the first wave down usually retraces >> about half or even 60% of its decline, but sometimes can extend further. I >> doubt that'll be true this time, but it might. The second decline is the >> worst of the three in terms of distance and duration. I'm convinced that >> the resolution will be brought about by the creation of a new currency to >> replace the dollar. It's quite possible we'll also merge our economy with >> other nations in the Americas as well; modeled after the EU. > > > The recovery wave referenced above did indeed peak at about 60%, and the > activity since then is consistent with a change in trend. This means we > have already begun the a resumption of the decline that began in 2008 (it > really began in late 2007, but most people are only cognizant of the 2008 > declines). As indicated above, this wave is typically the most severe, and > action should be taken now to prepare for a significant decline. I'm > reticent to use hyperbole, but this decline in US equities will be at least > 'historically significant', if not 'unprecedented'. > > The action I strongly suggest you consider is reallocating your funds *out > of equities* and *into bonds*. The bond market is in a bubble right now > and demand for bonds will likely become even more frenetic as investors seek > safer returns. Please note however, that I see this as a temporary solution > (meaning a year at the most). Eventually, the bond market will also be > affected by extreme volatility as investors become > increasingly disillusioned by bond redemption defaults, and at some point > the risk to hold bonds will outweigh the illusion of safety. > > Longer term, I believe the best place to preserve wealth will be in > precious metals, with silver being the most attractive. Precious metals > should provide some protection through a hyper-inflationary environment and > eventual currency collapse that I still anticipate will manifest in the 2012 > - 2014 timeframe. >
