Another Reason To Be Wary of the Stock Market...
Unfortunately, we're seeing it play out in Japan on the Nikkei index, which plunged over 13% in today's trading with two hours left in the session.
My thoughts and prayers are with the families of those who perished, and those who are suffering through health challenges. The loss of life and health concerns from the aftermath of the tsunami and nuclear accidents are a much bigger priority than investment losses.
These events in Japan remind me why I prefer tangible assets to financial paper assets (unless you're a nimble trader who can get in, take your profits and get out). The ultimate collateral a holder of financial paper assets has is the public's confidence in those assets.
When a financial crisis or natural disaster hits and undermines that confidence, it lowers the value of those paper assets and usually (assuming no government intervention and a free market) takes a long time for that confidence - along with related asset values - to come back. As we've seen with Enron, MCI and other dot.com graveyard stocks, sometimes it never does.
The Nikkei has lost 23% of its value since February 21st, less than a month. That reinforces my belief that the stock market is not a "safe and secure" place for your money. The US stock market is a high-risk, low-reward proposition for every American who doesn't understand the fundamentals of the economy, and the companies of the stocks they invest in.
I believe that gold and silver mining and agricultural commodities are probably the best sectors to invest in for the longer-term. However, there's no guarantee that over the next few months and years we won't see significant and sharp downturns (similar to the recent plunge in the Nikkei) in every investment class - commodities and stocks included.
Any average financial planner or advisor who says: "Stay in the stock market for the long term" should have their head examined.
Anyone who understands what's going on politically, financially and economically realizes we're in uncharted waters - we've never had these levels of debt, unfunded liabilities and government spending in the history of the United States.
It will take at least several years - and probably a decade or more - before we come close to resolving these debt, spending and liability issues. In the meantime, you should learn to invest for cash flow instead of capital appreciation... unless, you're a skilled stock, options or commodities trader who knows what you're doing.
My thoughts and prayers are with the families of those who perished, and those who are suffering through health challenges. The loss of life and health concerns from the aftermath of the tsunami and nuclear accidents are a much bigger priority than investment losses.
These events in Japan remind me why I prefer tangible assets to financial paper assets (unless you're a nimble trader who can get in, take your profits and get out). The ultimate collateral a holder of financial paper assets has is the public's confidence in those assets.
When a financial crisis or natural disaster hits and undermines that confidence, it lowers the value of those paper assets and usually (assuming no government intervention and a free market) takes a long time for that confidence - along with related asset values - to come back. As we've seen with Enron, MCI and other dot.com graveyard stocks, sometimes it never does.
The Nikkei has lost 23% of its value since February 21st, less than a month. That reinforces my belief that the stock market is not a "safe and secure" place for your money. The US stock market is a high-risk, low-reward proposition for every American who doesn't understand the fundamentals of the economy, and the companies of the stocks they invest in.
I believe that gold and silver mining and agricultural commodities are probably the best sectors to invest in for the longer-term. However, there's no guarantee that over the next few months and years we won't see significant and sharp downturns (similar to the recent plunge in the Nikkei) in every investment class - commodities and stocks included.
Any average financial planner or advisor who says: "Stay in the stock market for the long term" should have their head examined.
Anyone who understands what's going on politically, financially and economically realizes we're in uncharted waters - we've never had these levels of debt, unfunded liabilities and government spending in the history of the United States.
It will take at least several years - and probably a decade or more - before we come close to resolving these debt, spending and liability issues. In the meantime, you should learn to invest for cash flow instead of capital appreciation... unless, you're a skilled stock, options or commodities trader who knows what you're doing.
posted by Brian Ochsner | 11:08 PM
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