Monday, March 3, 2014

Losing it all with no hope of recovery!

On occasion we all run into a "know it all" a person that is sure they have all the answers and will have the right response to any situation. Currently I see anyone bullish on this market viewing any pullback as a buying opportunity and sure the market will continue to rise as such a person. Often the people following this mantra feel invincible. After a good run it is strong in the nature of the human animal to double-down. We tend to get careless at a market top and ignore when a market turns or begins to take large swings. 

Those of us who have had the misfortune of losing a lot of money fast will tell you we never saw it coming or that it got far worse than we envisioned in even our worse case scenario. Sure they talk about diversifying but often even this recipe is not guaranteed to protect you. Way back in 2008 when the meltdown was just starting I found myself on a cruise ship in Greece where one of my fellow passengers who had embarked on this strategy was withering in pain.

A recently retired teacher who had placed her life savings in three solid stocks that were thought to be safe was in total shock. The three stocks she had bought were Fannie Mae, insurance giant AIG, and Lehman Brother. all of these were considered very safe prior to the 2008 financial meltdown. This woman had taken advice she considered sound and financially conservative and stepped into a giant hole losing almost all her savings, needless to say she was devastated. Just remember this is a dangerous game and at risk is a lifetime of hard work,sacrifice, and savings.

In the fast paced world of today we have all witnessed value suddenly vanish. Many examples exist from Ponzi schemes like the one ran by infamous investor Bernie Madoff to stocks that rose then crashed like Enron. We should constantly keep in our mind that we might at any time become a victim of this ugly fate. We are often lulled into complacency that markets are regulated and precautions have been put in place to protest us but  let me make it crystal clear, once it happens it is to late.

Investing in the stock market is not as easy as many people think or we are lead to believe. The idea that you can buy anytime the market pulls back is flawed. This becomes increasingly risky when the market is at lofty levels and when someone uses margin or borrowed money to leverage their position. We should also consider that cyber crime is real and continues to grow, this can spill over and create problems. With many people invested in intangible assets that are based on paper and promises such as pension payouts they leave themselves vulnerable to losses.

Nothing is sadder then losing the love of your life with no hope of getting that person back. An analogy might be make with a older person losing their life's savings and fortune. Bad luck does happen. When someone is young they have the option to learn from their mistakes and they also have time. Time to start over. The elderly often do not have the option of returning to work or reentering the game. To lose it all with no hope of recovery is something we all face in life. This is when you pray for the good fortune that it will not happen to you.

1 comment:

  1. Top next week 14 march 2014 is fractal time of 9 march 2009.