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As we enter a new decade we are compelled to point out what, in
our opinion, is the "Lost Decade" of the United States. The
financial media, brokerage houses and advisors have done a good job promoting
the opportunity of owning US Equities, and as a result the average investor
continues to wait and hope that their cookie cutter, simplistic investment
strategies will provide for their future.
The reality is that investors have been severely punished for
"buying" and "holding" US equities over the past decade.
The following chart illustrates the "nominal" performance of the
Dow Jones from January 2000 to October 2009.
The next chart illustrates the Dow Jones performance when it is
adjusted for the government's measure of inflation, the questionable Consumer
Price Index (CPI).
The next chart illustrates the performance of the Dow Jones when
it is compared to a more stable measuring stick; gold.
To the average investor this insight should be devastating to
say the least. In the world of investing, ten years should be considered
"long term" and investors should not be okay with this kind of
performance.
Conventional thought suggests that an investor can expect an 8%
annual return from the broad stock market over the "long term". The
following chart compares this expectation versus the reality.
Contrary to historical evidence many professionals have insisted
that the market always rises at 8% per year over the "long term".
Unfortunately this past decade was a tough learning experience for many
investors as capital fled the stock market and entered the hard asset market.
The point of this article is not to win an argument about Gold
being a better investment than Stocks. We do not favor one asset class over
another asset class. Instead we are trying to illustrate that markets are
cyclical and not linear. No market goes straight up or straight down. There
are times that it makes sense to invest more heavily in the general stock
market and there are times that it makes sense to invest more heavily in hard
assets. Unfortunately the average investor has been led to believe that one
investing strategy could be used regardless of market conditions.
From 2000 - 2010 the place to invest has been hard assets and
during this time it was wise to limit exposure to the general stock market.
These long term market trends tend to last a very long time and
we expect this trend to continue into the next decade. However, no market
goes straight up or straight down. We expect that there will be times that
the US Stock market and even the US dollar will outperform gold and other
commodities. We expect that many investors will foolishly cash in their
stocks and then buy into a frenzied hard asset market only to be disappointed
when they once again miss the trend change. Ultimately, we expect a
parabolic, mega spike in precious metals that rivals the 2000 Nasdaq mania.
However, it is our opinion that this market mega blow off will happen many
years down a very bumpy road.
Going into 2010 we caution long time, hardened stock investors
not to wait another decade to decide that commodities are a wise investment.
At the same time we caution long time, hardened commodities investors not to
expect a straight up, one direction bull market. Both of these investment
views are likely a recipe for disappointment.
At investmentscore.com we use proprietary long term charts that
help us identify long term market trends. We then consult our weekly and
daily charts to help us identify lower risk entry and exit points. We try to
avoid the distorting affects of floating currencies by comparing markets
directly to one another. To learn more and to sign up for our free newsletter
please visit us at www.investmentscore.com. We recognize the challenges of the coming decade but at the
same time we are excited about the opportunities that will be presented.
Michael Kilbach
Editor
Investmentscore.com
Michel Kilbach is
the President and Editor or www.investmentscore.com,
an online publication designed to show investors how to make profitable entry
and exit trading decisions in high growth potential investments.
Investmentscore uses a unique scoring system as a visual guide to assist
investors in making lower risk / higher reward trades.
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Disclaimer: No content provided as part of the
Investment Score Inc. information constitutes a recommendation that any
particular security, portfolio of securities, transaction or investment
strategy is suitable for any specific person. None of the information
providers, including the staff of Investment Score Inc. or their affiliates
will advise you personally concerning the nature, potential, value or
suitability or any particular security, portfolio of securities, transaction,
investment strategy or other matter. Investment Score Inc. its officers,
directors, employees, affiliates, suppliers, advertisers and agents may or
may not own precious metals investments at any given time. To the extent any
of the content published as part of the Investment Score Inc. information may
be deemed to be investment advice, such information is impersonal and not
tailored to the investment needs of any specific person. Investment Score
Inc. does not claim any of the information provided is complete, absolute
and/or exact. Investment Score Inc. its officers, directors, employees,
affiliates, suppliers, advertisers and agents are not qualified investment
advisers. It is recommended investors conduct their own due diligence on any investment
including seeking professional advice from a certified investment adviser
before entering into any transaction. The performance data is supplied by
sources believed to be reliable, that the calculations herein are made using
such data, and that such calculations are not guaranteed by these sources,
the information providers, or any other person or entity, and may not be
complete. From time to time, reference may be made in our information
materials to prior articles and opinions we have provided. These references
may be selective, may reference only a portion of an article or
recommendation, and are likely not to be current. As markets change
continuously, previously provided information and data may no be current and
should not be relied upon.
Copyright
© 2006-2007 Michael Kilbach
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