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How you just lost money in a stock market that's up 40% August 5, 2009

Posted by Jeff Nabers in : Money, Personal Productivity, Self Directed IRA Solo 401k , add a comment

stocksup

Headlines abound, the stock market is up 40% from its March lows!!! Let’s all celebrate. Those who spoke badly of Obama, Bernanke, and Geithner have their foots in their mouths, right?

Not even close. These types of misleading headlines are the very weaponry of a financial system that tricks you, lures you, spikes your drink, robs you blind while you’re partying, and then nurses you back to sobriety in the morning by giving you another spiked drink.

Imagine you have $100 in the stock market. You experience a 40% loss. You now have $60. And, abracadabra, the economic rescuers have juiced the market back up 40%. You now have $84. Wait a tick, how exactly do I get back to $100? Well to recover from a 40% loss, you would need a 67% gain. You see, 40% of $60 is much less than 40% of $100, so the initial 40% loss was much larger than the 40% gain that followed. For those whose livelihood involves serious math, this is very obvious. For the rest of us, it should be an “ah ha” moment that exposes the red arrow, green arrow game.

Watching and listening to the financial news networks report about the stock market is like watching a sports game. And it entertains just like a sports game. In the midst of entertaining, it lulls us into watching the red and green arrows. Oh, it’s down today a few points. Hey look, it came back up. It feels very much like watching a basketball team surrender and regain the lead in a basketball game. If they are down by 40 points, and then they score 41 uncontested points, they have the lead and they win the game!

But it doesn’t work the same in percentage points. But just wait, over the long term the losses will be recovered and there will be profit, say the “experts” whose payroll checks are signed by Wall Street. If you buy that line of baloney, you will be further tricked. Because over the long term those losses will be recovered and there will be profits… but only as measured in dollars. If you factor in how over the long term those dollars buy less stuff, you will not find a substantial long-term profit.

Today the Dow closed at $9,320. But the dollar has lost over 96% of its purchasing power since 1913. Take 96% out of today’s Dow price and you get $372. In 1913, the Dow was at about $62. So the Dow Jones Industrial Average grew from $62 to $372 (in constant 1913 dollars) over a period of 96 years. That’s an annualized rate of return of 1.88%.

This bears repeating…

The Dow Jones has returned 1.88% per year for the past 96 years

Can you still get excited about a stock market that’s up 40% since its March lows when it is still a stock market that hasn’t even been able to produce an actual 2.00% return over the long run?

Or even more important questions: Is it worth the risk of losing a big chunk of the money you worked for just to “get some action” in a market that produces less than a 2.00% return over the long run? When you are down, can you wait decades without touching your money just to get back to your break-even point?

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Jeff Nabers is author of 5 STEPS TO FREEDOM: How to Cut Your Dependence on Institutions and Escape Financial Slavery

The Fragility of a Consumer Economy August 4, 2009

Posted by Jeff Nabers in : Money, Personal Enjoyment, Personal Productivity, Self Directed IRA Solo 401k , add a comment

fragile

When an economy is based on healthy, sustainable activity with a balance of production and consumption, the type of depression we are in can’t happen. In our consumption-based economy, on the other hand, nothing can “stimulate” things back on track. This is because the track we were on is unsustainable. There’s no going back on it. American consumers can’t spend & consume more today in an effort to “save” the economy because we already spent and consumed the goods of today.

Despite the “green shoots” talk that all the economists and politicians are spreading on TV and in magazines and newspapers (pay no mind that these are the very people who didn’t see the crash coming–we are expected to now value their opinion about what’s going to happen next), what’s next isn’t good for the general economy. As illustrated by Ian Mathis of at Daily Reckoning, by the end of the year about 1.5 million jobless Americans will exhaust their unemployment benefits.

We know that unemployment is sky high right now (10% official figures and 20% as figured by shadowstats.com), but millions of those jobless Americans are receiving checks from the government that are continuing to pay for their rent, groceries, Venti 7 Pump White Mochas, etc. By year’s end, about 1.5 million Americans will no longer have a source of income. In other words, the further reduced consumption affiliated with unemployment hasn’t even come home to roost yet.

Waiting for the “general economy” to be brought back to life will turn out to be a disappointing plan. Your personal economy is what matters, and thriving is a matter of what you make for yourself. Just as the Soviet Union taught us that central planning doesn’t work, we will relearn that lesson as central planning continues to fail in the United States. Don’t wait around for stock markets to go into a long term rebound (as opposed to the bear market rally or “bounce back” that comes before the next leg down in every stock market crash) or for the government to get your job back for you. If anyone’s going to bring your prosperity, it’s going to be you!

Investment Opportunities July 24, 2009

Posted by Jeff Nabers in : Money, Precious Metals, real estate, Self Directed IRA Solo 401k , add a comment

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When listening to feedback from Nabers Group clients, one message is loud and clear, “We want to see investment opportunities from you.”

I sent out a survey to all of my clients recently, and I’d love your input too. With my activities in many circles, I have access to mounds of solid investment opportunities. If you complete this survey it can help me understand what types of opportunities you are most interested in.

Click here to take the survey.

5 Steps To Freedom: How to Cut Your Dependence on Institutions and Escape Financial Slavery July 6, 2009

Posted by Jeff Nabers in : Money , add a comment

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buy

Finally, it’s here! Amazon won’t have it in stock for another 2 to 4 weeks, but you can use the buy now button above to order the book and I’ll ship it directly to you immediately. (If you’ve already ordered one, it’s going out to you today.)

If you’re reading my blog, I assume you want to take control of your finances and your life. Get the book to find out…

Here’s the official (more…)