Investing in the stock market, diversifying asset classes

When looking at a chart of the Dow Jones Index prior to Reagan's second term, spanning the years from 1928 through 1984, it is clear that the stock market goes up over time. However, investing in the stock market over that time was anything but a sure thing. In fact, the only time during that entire period when an investor could safely invest in the index and hold it for a decade resulting in the realization of a worth-while profit was between 1945 and 1955. At any other entry time, the investor had better have a fairly savy exit strategy or be willing to hold their investment for thirty years if they want to make the risk worth their while. Even for those investors insightful or lucky enough to buy at the low on strong down moves, it does not seem to guarantee a worth-while return within a decade without intelligent exit strategies, exemplified in 1970.

So, how can someone effectively invest without getting caught within the complexity of determining entry and exit points?

Well, let's juxtapose a continuous soybean chart with the stock market.


During the period from 1964 through 1984, while the stock market was going sideways, poor entries and exits would double an investment in soybeans. Obviously, this is ignoring some of the ins and outs of commodity trading such as switch orders to roll contracts and other such details the general investor would need to learn. But, as an asset class, the point is still valid. With intelligent diversifaction, lulls in investment returns within the Dow Jones Index can be muted.

For better or worse - Risk aversion, lack of confidence, undermine economy

I have heard that the worst is over, but I am not convinced. The magnitude of risk aversion which directs the "prudent minds" to maintain cash holdings, liquidate assets, and position their fate in fiat currency is officially as irrational as buying stocks in 1998, leveraging your stock gains to buy a home you can't afford, and then taking loans collateralized against inflated house prices to cover the lost income from your failing mutual fund.

If you want your dollar to go up, build up the American worker and employment base. Otherwise, the dollar may be bouncing strong against the Euro but it will be hammered against gold. This means that, as it has always been, money must be spent for money to be made. Costs can only be cut so deep before you kill the patient. The economy is a living, breathing, organism because it is made up of living, breathing, organisms.

The degree of risk aversion and lack of confidence in our economy, and around the world, is our greatest crisis. Now, to be clear, I am not suggesting that anyone should ignore risk analysis or falsify their internal confidence checks. There are certain truths that hold true, enabling us to build confidence, invest money, and avoid risk. (1) Family and friends. Help out your family and friends, because everyone is stressed. If you have a job, help family and friends find one too. It will cost you less than paying for them, and build every one's confidence at the same time. (2) Greed will make you a target. Nobody likes greedy people, but everyone knows they have something worth taking. (3) Patience pays off faster and greater than frustration, speedy actions, and/or hustling. Business people, and people in general, trust patience. Patient people have clarity, and are respectful.

I guess this post was more of an editorial than I thought it would be, but it is still my contention that fear resulting from an over-emphasis on risk aversion due to a lack of confidence is the most major challenge our economy faces.

Initial jobless claims decrease, but unemployment still growing...

Initial jobless claims decreased from 663,000 in the week ending April 4th to 610,000 in the week ending April 11th. This is still not quite a strong sign for the economy. The national unemployment rate is still growing from its already very high rate of 8.5%. Areas like Michigan are even doing worse with unemployment rates of over 12%. Within the United States there are over 6 million unemployed workers, which is the highest total in the nation's history.