Friday, November 01, 2013

Why Your Wrong About the Stock Market

Why Everything You're Told About the Stock Market is Wrong by Market Authority

This is a picture worth 10,000 media stories...

SPY 5 year

Click Images to Enlarge

Please view the above chart of the SPY (S&P500 index ETF). This is the benchmark of the stock market. In the late 90s, the SPY replaced the Dow Jones Industrial Average as the main benchmark as it included more companies (500 vs 30 for the Dow).

The SPY is now trading 150% higher than the March 2009 lows, ranking it among the best 5 year returns in stock market history. On top of this performance, there are no signs of a significant correction (re: a pullback between 10-20%) in the near future. I will cover these bullish indicators in future missives. Today I want to tell you why you've missed one of the greatest rallies of the past 3 decades.

Please take a moment and ponder this question . . . Why were you not involved?

Well, if you happened to buy the lows and were fully invested - fantastic job! You're in the small minority of investors who saw the panic in early 2009 as a generational buy-signal.

To those of you who didn't catch a big chunk of this move, I have this advice for you...

It's not your fault so don't beat yourself up over it. The information you were given was not only misleading but (at times) blatantly false.

Let me explain by teaching you the Allegory of the Cave. In Plato's Cave, there exists a gathering of people, who for all of their lives, have been chained up and facing a blank wall. On this blank wall, they're only able to see shadows of things passing in front of a fire behind them. As these shadows are all they've ever seen, they represent their reality. According to Plato, the philosopher is a prisoner freed from the cave and realizes that the shadows don't make up reality at all.

You, the average investor, are cave dwellers and the shadows you see on the wall is the misinformation from modern-day media. The signals you are receiving in that cave don't represent the reality of what's happening to the market. What you are seeing on CNBC and reading online is just noise.

There are a few reasons for this:

1. The main goal of the 24-hour cable news cycle is to increase viewership, not to provide accurate information. CNBC only exists to sell 30 second infomercials for Cialis, P90X, and Propecia.

2. The only way to keep viewers engaged is a continuous cycle of fear-mongering that will leave you worried enough to continue watching.

This persistent fear-mongering has kept investors on the sidelines and created a "wall of worry", a necessity for a broad stock market rally. There are many ways to follow this sentiment, so stay tuned for future missives when I explain them.

For now,take a look at the 1-year chart of the SPY to see what I'm talking about.

SPY 1 Year

In Dec 2012, there were fears of going over the "fiscal cliff" and the market pulled back.

Guess what? We went over it and the market went higher.

In February 2013, there were fears of the "Sequester" and the market pulled back.

Guess what happened? We "sequestered" and the market went higher.

In June 2013, there were fears of a Bernanke "taper" and the market pulled back.

Guess what? The fed actually didn't taper and the market continued higher.

Finally, this past month, there were fears of a government shutdown and breaching the debt ceiling and the market pulled back.

See a pattern here?

You will never realize your financial dreams if you stay in that cave and listen to media that exists to sell you Cialis. So forget about all the information you've heard over the past 5 years that hasn't made you money. Stop listening to the "noise", and start learning how to find accurate signals.

How do you find signals? The best place to start is to find a system that fits your investment style and profits in various market conditions.

Click here to review that type of system.

But for now, please contemplate what I said about financial media and "make sure to call your doctor is headaches persist..."