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  Thursday April 24th, 2014    

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Where are we going? (05/12/2004)
By Al Thomas


     
Talk about confusing. The stock market was going up nicely during 2003 and it looked like investors were going to get back some of their losses. Now it has started down again and they need to know - is this a correction or are we going back to those old low prices?

First I have to tell you that your broker and financial planner don't know. How can I be so sure? Well, look at what they did to your account from 2000 to 2003. Unfortunately, brokers and financial planners are all taught by the Wall Street mavens who work for the big brokerage houses. The one thing they never want you to do is sell and go to cash. If you do that they don't make any money.

Yes, financial planners and brokers do get advice from their company "experts" who are supposed to be able to find things that go up or at least don't go down and give you a decent return. We have seen the scandals about how the "analysts" who work for these companies tout things they think stink. Let's hope that is a finished chapter for Wall Street.

The long term and prudent investor has to know when to be IN the market AND when to be OUT. Is there a way to do this with any accuracy? Yes, there is despite what your financial expert(?) may tell you and it is very easy to do. What I will explain is what saved many folks huge amounts of money between 2000 and 2003. Don't accept anyone's word until you have checked this personally.

Use your computer to go to the web site www.bigcharts.com and if you don't have one you can do this at the library. In the Interactive Symbol box type in any one of the major indexes such as the Dow Jones Industrial Average (symbol DJIA) or the Standard and Poor's 500 Index (SP500) and then ask it to compute a 40-week Moving Average on the web site. (It is easy so I won't explain it here). Choose a time frame of one decade. You will immediately notice that as long as that red line is going up you can own equities. When it turns down you should be in cash or a money market.

That 40-week line turned up in 1995 and did not turn down until the beginning of 2000. At that time you should have sold everything and waited until about April of 2003 when it turned up again. It still hasn't turned down. When it does you want to be in cash again.

Where are we going? I don't predict and you should not rely on someone else to tell you especially the so-called "experts". Let the market tell you. It is the only one that knows. 

 

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