Not Just Another Incredible Buying Opportunity

I read a lot. I don't read fiction, I'm boring and fiction excites me too much. However, recently it seems that many periodicals reporting on the facts seem to be dealing in the fictional world where sticking to the long term investment strategy is the best strategy.

Ok, so its not total fiction, but let's classify it as "historical fiction". My problem arises when a magazine called "Smart Money" tells its readers to focus on the long term and stop watching CNBC - "eventually your long term conviction will pay off". My problem is that the word eventually employs a wreckless amount of historical fiction. Let me illustrate my point.

The guts of the argument employed in the "long term" view is that over the past 100 years, the stock market has returned more than any other asset class. This I will not dispute. However, what I think would be fair would be if the same people trotted out all the 100 year olds who are still around to brag about how taking this advice made their lives secure and full of wealth by investing in the Dow.

Ok, so you get my point - the long term is nebulous. The real problem arises in the fact that the long term doesn't suit everyone's time horizon for retiring or "cashing in". All the same people who say market timing is not a good way to invest seem to figure in the fact that you'll be able to do it once successfully, exactly when you want, just before you retire, and probably so that you CAN retire.

Well, needless to say - if this sounds like a good bet - all those people who have accomplished this successfully, please post a comment to brag! For all the others who saw their nest egg shrink to levels back in 2003 today or in the YTD leading up to this - don't be afraid to post this question to your financial advisor.

For those people who already know they'll hear a line of bullsh*t from their broker/wealth manager outdone only by Nancy Pelosi's statements somehow finding a way to blame this all on George Bush, lets get on to how you're fear is relevent to your wealth management.

Question 1 - When did you first become concerned about your retirement savings eroding?

Does Oct 19, 2007 ring any bells?
Does Nov 26, 2007 ring any bells?
How about Jan 22, 2008?
Maybe Mar 10, 2008?

In case you haven't - those would be the 4 times you had great opportunities to read the writing on the wall, get scared and move to cash. Now investment professionals will tell you that these were all chances to "sell at the bottom". However, selling on previous dates would have saved you bundles. In fact, Mar 10, 2008 would look like a smart time to be chicken even if you'd ignored the prior three. And maybe if you'd watched a little CNBC you might have an inkling of the risk and realized that all the super safe things being sold to you were potentially coming into jeopardy - Muni Bonds, High Yield Money Market funds featuring Auction Rate Securities, the DVY with its healthy alottment of financial companies about to head into crisis making the dividend yield seem like peanuts in comparison to the losses already mounting.

I bet your broker didn't call you to warn you about all this. Quite the contrary. Even if you read the news and decided to call him/her he/she probably just said - "great chance to dollar-cost-average" - this is code speak for I'm collecting a fee from you, but I'm not smart enough to show you how to weather this or profit through whatever is changing because I don't know what is going on, but please keep giving me money so that eventually (there it is again - "eventually") you'll (more importantly your broker) be proven to be genius.

So, my condolences to those person's looking to retire in 2009 - you're likely off 20% of your equity position along with another 5-10% in your home if you wanted to sell it. Hopefully you're not completely in equities and maybe your bonds have held up better, but all this misses the point - you probably saw this coming last fall or after the new year or in March or in June, the news told you about it, and you could have avoided it if only your wealth manager cared enough to be bold and protect you. Now it may all be fear related (herd selling) in which case maybe the herd will return, but right now your portfolio is lunch for the bears and you're thinking about working longer. But, just in case today wasn't the bottom and there is more pain to come (there is - AIG, Goldman, Morgan Stanley, WaMu which CNBC has stated 37 times today already) wouldn't you rather be on the sidelines watching another 10% drop even if it might mean you'd miss 5-10% on the upside when the market finally turned.

My point is - your fear, if you stay informed, is the best wealth management tool you have. It has no vested interest in keeping you in the market and if you listen to it you'll at least know your accumulations won't dissipate which is exactly what you need in order to not have to work even longer while you wait for "eventually" to come again....and hope you see it next time, because you're broker won't.