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Did The Fed Kill The Long-Term Investor?
Submitted by Lance Roberts of STA Wealth Management,
Gone are the days where people looked towards next year when building their portfolios, or five years down the road as they approach retirement. Now from a combination of apprehensiveness and shear paranoia in our unstable markets, investors are looking only as far as they can throw for their personal investment decisions.
In more than 30 years of money management, I've never seen such a rapid change in the way people make financial plans. Instead of saving for the future, many are opting for fast gains — yet at the same time they want low risk. Others are playing it completely safe. In fact, in a quarterly poll my firm took, 83% of respondents said they were holding on to their cash versus investing in the stock market.
Why are investors so hesitant to invest when markets are at record highs?
It should come as no surprise that the 2008 financial crisis is still a major factor. As the banks were crumbling, the housing market caved and unemployment rocketed, investors' confidence sunk.
But in the years that followed, we saw a huge amount of government intervention in the form of various stimulus packages. While some may argue that this stimulus, including the Federal Reserve's quantitative easing, saved our economy, this injection of billions of dollars each month to buy government bonds has created a dangerous façade of market strength.
This is because although we get a visible boost from QE, these upward swings are merely a temporary high. The public has taken note of the Fed's parlor trick. An overwhelming 93% of participants in our survey wanted to end QE and let the markets readjust without government support. And we have every reason to worry. By the Fed thinking they can own an entire Treasury market, it is funding a new asset bubble that is at risk of bursting.
What should the Fed be doing to create jobs and economic recovery?
The Fed's recent decision not to slow its bond purchasing surprised everyone. This move, or lack thereof, only underscores the Fed's uncertainty about the U.S. economic recovery, making already uneasy investors think twice about throwing their hat — or their money — into the ring. And the fact that in a post-financial crisis world, investors are viewing the U.S. economic climate with a skeptical eye makes it all the more important for financial advisers to adapt to a different economic environment while also managing client psyche.
At STA Wealth Management, we've had to accommodate these new lines of thinking by reinventing our investment philosophy. Many of the risk management tools are no longer as useful. For example, in the past we could use the market's long-term moving averages to determine support and resistance levels. When these levels were broken it was historically indicative of a change in market trend. However, the impact of monetary interventions has rendered many of these longer-term tools ineffective.
The same applies to fundamental and inter-market analysis. Correlation between asset classes is high and stocks with low share-floats and poor fundamentals outperform fundamentally sound investments. While we still make fundamentally sound investment decisions, our analysis has had to change to be more accommodative to the increased price volatility of the markets.
The core fundamentals have changed because of central bank intervention, high-frequency trading and artificially suppressed interest rates. This is coupled with a large, and growing, amount of distrust with Washington. Our STA Wealth Management poll found that 46% of respondents felt that partisan politics were stalling U.S. economic growth.
The public is tired of not seeing solid movement to help our economy recovery in the wake of 2008. In the past five years, all we have been able to sustain is a stagnant unemployment rate and an influx of stimulus packages that are holding our economy together by the bootstraps instead of enabling it to grow on its own.
While we try to find that path to recovery among failed policies, investors are going to continue to gauge their risks and develop a new type of strategy to adapt to an extremely unclear future.
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Oswald did it
Well, yes, the FED did kill those of us who long ago bought bonds. F´ em! I have been buying gold instead.
And CA$H at 0% is better than bonds anyway...
The Fed didn't kill the long term investor. It killed the long term.
On a short enough timeline....
The article is predicated on a rather short timeline.
I have long-term equity positions where the annual cash-flow vastly exceeds the original cost basis. And I'm a small-dollar and short-term investor when compared to TPTB's Trusts that thrived and were never effectively dismantled at the dawn of the 20th century.
No soup! for the nouveau riche riff raff...
Long term for me is 30 minutes or less
I've got `Shear` paranoia myself, is that a metaphor for what happens to their customers?
It has become a fools game to save in Fiat dollars. We all know the FED is going to destroy the value of those. They will print until we run out of digital 0's and we have to call in the Y2K crew.
http://sprottmoneyblog.com/jeffrey-christian-attacks-the-messenger-accuses-andrew-maguire-of-fraud/
I'm sure if there are any long term investors left the NSA will find them.
+ 1
I´m sure you´re right, for sure I´m on their List...
With all the HFT supercomputers "long term" is about 1 second.
Everyone's tuned to WIIFM-FM (What's In In For Me)
'Twas Mr. Greenspan in the Eccles Hall with the Printer.
Geez, that prune is all over the place trying to redeem his lying ass.
It doesn't appear to be working.
Is there anyone besides the Investors at the Fed or Big Boys on Wall St?
/s
These people will get wiped out and the money will transfer to the ones that planned for the long term. It's a cycle.
"What should the Fed be doing to create jobs and economic recovery?"
Nothing. That's not why it exists. How much more proof do you need? Why the fuck are we even having this conversation anymore?
It's a scam scam scam scam world. Lots of people have figured it out.
Walking side by side with death, The devil mocks their every step
The snow drives back the foot that's slow, The dogs of doom are howling more
They carry news that must get through, To build a dream for me and you
"Why are investors so hesitant to invest when markets are at record highs?" Because once you realize that the game is rigged and you, the retail investor, are the mark it doesn't matter any more how big the pot is. Fool me once, shame on you. Fool me twice? Nope, not going to happen.
technically, we're looking at thrice.
I am a long term investor in zirp. the value of my holdings decreases every day. :alas:
If investors are becoming that skittish then anything that spooks the market will create a headlong rush into oblivion.
Why are investors so hesitant to invest when markets are at record highs?
Oh, I suppose because we always must buy high and sell low? Wow!
The Fed has enabled investors to outperform you Doomer Douches going on 30 years!!! Pardon me Tyler, I glossed over your point...
Yes, the Fed *did* kill the long term investor.....but this is incredibily bullish for markets (b/c computerized markets love short term investors).
Until that one time...because going all-in owrks everytime.....*but* once
The Fed is also destroying business investment. The basic investment is borrow cheap money if you can. With this money, you pay a dividend and/or purchase company stock. These activities do not increase economic activity of the business; therefore the Fed policy is destroying employment growth too!
Antal Fekete has written on similar effects of low (and declining) interest rates and the destruction of capital.
The Fed, the globalist banks and the US government in concert killed all trust in "the system". The public may be ignornat, but they do not trust the banks, the markets and the government... and they are working on developing a complete distrust of the media as well.
I assume this is all planned. Because, they could have done it very differently.
Shakespeare was wrong. The first thing to do in not kill all the lawyers, but make the bankers rich. Or maybe kill the bankers?
Jesus throwing them out of the temple has not worked for more than 2000 years!
Her are a couple of jokerrr.. Bankerers:
“Many of the new financial products that have been created, with financial derivatives being the most notable, contribute economic value by unbundling risks [???] and shifting them in a highly calibrated manner. Although these instruments cannot reduce the risk inherent in real assets, they can redistribute it in a way that induces more investment in real assets and, hence, engenders higher productivity and standards of living.” – Alan Greenspan – March 6, 2000.
“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.” – Ben Bernanke – July 2005“For my own part,” Ms. Yellen said, “I did not see and did not appreciate what the risks were with securitization, the credit ratings agencies, the shadow banking system, the S.I.V.’s — I didn’t see any of that coming until it happened.” - Financial Crisis Inquiry Commission in 2010.
The Fed's end game is the destruction of it's fiat. It's just a matter of a short time before all those dollars to come back to the US.
The Fed increasing QE is just the right trigger.
If most of the posters are correct it's ammo and barter time just around the corner. I'm prepared for that but I'm also prepared for things to continue with inflation and the stock market will keep up. Again, if that is wrong I've got plan 2 but to have missed out on this 3 year market run is short sighted.
I'm a "long-term" investor. I plan to hold my 10 shares of McDs for at least a month.
In fact, in a quarterly poll my firm took, 83% of respondents said they were holding on to their cash versus investing in the stock market.
Ok so here are 4 thoughts:
One, the individual investor is really not in this market. If so this may explain the lack of volume. Somebody still owns the shares.
Two: That institutional (401k and pension and hedge funds) funds are invested and moving this market.
How can one and two be happening when hedge funds and pension funds are sucking wind? Could 401k funds propel this market?
Third: insurance companies. Hmmmmmmm.
Fourth: The Fed and its member banks are buying everything. Hmmmmmm.
What should the Fed be doing to create jobs and economic recovery?
How bout standing the fuck out of the way for starters?
FRAUD killed the long term investor. The Fed is the fraud factory. Assets priced at mark to fuckall and losers don't lose.
Cooked markets are the only game in town. Winning is not to play. Fact, droves of people in their 30's and early 40's have hit the exits -- now robbed through zirp.
"One of the evils of paper money is that it turns the whole country into stock jobbers. The precariousness of its value and the uncertainty of its fate continually operate, night and day, to produce this destructive effect. Having no real value in itself it depends for support upon accident, caprice, and party; and as it is the interest of some to depreciate and of others to raise its value, there is a continual invention going on that destroys the morals of the country."
Thomas Paine, 1786
those with wealth and power in todays america are all crooks and sociopaths. they control the markets..so tell me why I should benefit by giving support to the very monster that is eating my country? If I never make a gain in these chambers of financial fraud it will be for that reason. until corzine and banksters go to jail, not one dime.
Transaction Costs
Once upon a time, it was expensive to trade. They lowered the cost of trading and now that is all we have.
"83% of respondents said they were holding on to their cash versus investing in the stock market."
That's totally safe. Yup.
Keep it in the bank, where interest doesn't even come close to keeping up with inflation (which will be especially true when hyperinflation finally starts). Also make it easy for the government to steal it at will like in Cyprus. Sounds like a good idea to me.
Investing in fiat money is just as bad as investing in stocks. If you really want to prepare for retirement, you gotta make yourself as self-sufficient as possible. Own your own property, grow your own food, supply your own power and water, and have enough money to make your yearly property tax payments, which will no doubt skyrocket as the government gets more desperate. And don't forget to invest in guns and ammo, of course.