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Back To Basics Is The Way Forward

May 25th, 2010 at 07:52 pm

Imagine

Where would we be if more of the high-impact economic and financial experts had utilized their massive exposure to consistently place more focus and push behind the long-standing alternatives that would have reliably prevented the kind of life-altering problems we are now seeing for so many people?

Instead we have watched and absorbed as many of these experts have kept the spotlights focused on jumping back and forth between different sectors and asset classes of the financial markets -- popularly known as the market timing game.

And if you don't have the time or inclination to play the game, those who pay the major bills to keep these spotlights on -- and thus direct their focus -- will gladly do it for you, generating enormous turnover fees in the process while the associated risks remain with you.

The S&P 500 is the widely followed index of large-cap American stocks that is considered a bellwether for the American economy.

The major sea change in the character of its progression over the past two decades presents a strikingly clear picture of how this institutional promotion of the market timing game has created a volatile and unstable economic environment.

http://moneycentral.msn.com/investor/charts/chartdl.aspx?PT=...

Could it be that many of these experts who are supplying the breaking news from the economy and financial markets actually do not see and understand how this volatility --that the timing game depends on -- has crippled our system right before their eyes?

Doesn't seem likely.

If It Bleeds, It Leads

To survive let alone thrive in the breaking news area of the media world, long term safety and stability are not sexy subject matters to rattle on about. They simply will not meet the demands of the ratings-eating media machine that has an overwhelming appetite for strife. As a result, what we are witnessing is clearly a driving force behind the ongoing instability.

Henry Ford once said, "A business that makes nothing but money is a poor kind of business."

Waiting around for this cat to change its stripes is not realistic. So let's take a closer look at how this media phenomenon is used to work magic for those who support and manipulate it, its actual results for the average person who has invested their life savings in this system and some alternatives that will break this downward spiral and move us forward.

Playing with House Money

The big guys understand the basic rule -- the absolute necessity -- of playing it safe with their Core Financial Assets. In other words, play it safe with the house money by having in place at all times a firewall of safety around that which is necessary to maintain what you have achieved.

And even when they decided to do some risk taking with their own household accounts, they were sure to have the contingency plan in place whereby the U.S. taxpayer would be the go-to guy if things got out of hand.

Still, if the general rule is to play it safe with house money, how is it, why is it, that the average investor continues to be encouraged -- however subtly so -- to continue gambling with theirs?

The Flying V

For those not familiar with the terminology, a "V-shaped" recovery is a term used repeatedly by the experts to describe the notion that when the Financial Crisis hit and we saw a precipitous drop in the economy and financial markets, that this was somehow a temporary problem that would immediately correct itself once we threw a bunch of money at it and we'd shoot right back up and be on our merry way just like before.

This was a completely false and misleading premise from the start in that it obviously ignores the internal damage that had been deeply rooting itself for decades before reaching an inevitable point of implosion. And to even consider that damage of this magnitude could possibly be corrected or repaired in a short-term time frame -- one quick bounce off a bottom and away we go -- pushes all logic right out the window.

Once the house of cards collapsed, in pretty short order, we started getting this parade of happy talk experts streaming through the extended infomercials for Wall Street armed with the same basic call to action script designed to keep people and their assets in the game -- or get them back in.

With very serious, pedantic looks, they stare into the camera and start reciting this come-hither blabber about how we've got a V-shaped recovery going on. The markets react to this unfounded stimulation and the message is driven home: Act now, or let us act for you. The train is leaving the station and you don't want to miss out!!

Let's stop and think for a moment. Out in the real world of the real economy, where is this big V happening? Have you spotted a big V flying over the land? Maybe it's busy circling over Europe? Maybe we should get the UFO guys in on this?

Is this the appropriate and accurate message from people who have been given the spotlight and are supposed to know what they're talking about?

If you're really just a infomercialist hustling for private interests, just say so. When using the publicly-owned airwaves, wear a little ID badge or make the type of disclaimers that are now taking up more than half of all the pharma commercials. Be straight about it.

And what about the go-to guys who have to make their lives work in the real world? What's their backup plan?

The Lost Decade

So where has all this expert advice taken the average investor over the last ten years? According to the Dow Jones Industrial Average, S&P 500 and Nasdaq, not very far.

http://moneycentral.msn.com/investor/charts/chartdl.aspx?S...

http://moneycentral.msn.com/investor/charts/chartdl.aspx?D4=...
http://moneycentral.msn.com/investor/charts/chartdl.aspx?Sym...

For all of this daily bombardment of "It's up, It's down", what we really get is quite meaningless, glaringly counterproductive and grossly misleading -- most importantly from the perspective of the one thing we cannot replace: TIME.

When you walk into the virtual reality of any casino you will never see a clock. In this carefully planned and psychologically controlled type of environment, the last thing they want you thinking about is your time.

On average, how many decades out of the normal life cycle are your most productive? Approximately 3. What's the financial wizards' recovery strategy for this 1/3rd loss of the time value of your most productive years? There is no recovery.

Now, even to the most casual observer, smoke-and-mirrors mumbo jumbo like "Don't worry, it'll come back..." just doesn't cut it anymore when it comes to the reality of your time on this planet.

"It is generally agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of Stock Exchanges." - John Maynard Keynes

Conservation - A Shift in Perspective

Like the natural resources we all depend on, our financial resources are of equal importance. Especially considering how one supports and impacts the other. The ongoing fallout from the Financial Crisis is not a regional event, but a global contagion reaching and affecting every corner of planet Earth.

Do a Google search on conservation of natural resources and see what comes up. Then try a search on conservation of financial resources and compare the results.

From the same level of concern and priority given to the preservation and sustainability of our natural resources, would it not make sense that the universally established principles and theme of Conservation be broadened to include what we have come to realize, unmistakably, are our limited financial resources?

The individual is the basic building block of any real change for the better. It's never too late. So with the fresh perspective of Conservation, we can each make the choice and commitment for ourselves and the generations to come to get some backbone and act responsibly.

How can it happen otherwise?

Why do we leave major parts of our life exposed in today's world?

We know and understand the necessity of insuring ourselves before the fact against forces absolutely beyond our control for such things as our health, homes and businesses, not to mention the potential liability every time we get behind the wheel of an automobile.

By the same simple logic, would it not make sense to insure, reliably, before the fact, our life-long savings for the major milestone events that are date certain such as the tuition for our children's education and our retirement? And we're not talking about those asset allocation models where risks are shuffled around like deck chairs on the Titantic.

These widely used models were one way to definitely generate all kinds of turnover fees, but, when put to the real test, they did not live up to their promise.

Again, not sexy subject matter like market timing and the my crystal ball is bigger and better than yours nonsense. But at the end of the day, in the real world where people are responsible for themselves and others, the only "timing" that matters is this: will what you worked for be there when you need it?

Independent Thinking for the Greater Goood

Predictions, as we are seeing, are nothing more than good guesses or bad guesses. The time has passed for relying on experts whose crystal balls have been shattering left and right. The chicanery and game playing of the prediction business that the media thrives on is out. Long-term planning and preparation for the inevitable and unpredictable twists and turns that lie ahead is back -- it really never left.

The choice of direction from here is simple and straightforward. That's right, simple and straightforward, not vacuously sophisticated and needlessly complicated in such a way as to separate us from the basic fundamentals that will never, ever be denied -- which is exactly how all houses of cards are designed and built.

Hold it! Back up the truck. Fundamentals?? You know, the simple, old-fashioned, corny stuff like you can't spend more than you make.

"If you know how to spend less than you get, you have the philosopher's stone." - Benjamin Franklin

We can continue to choose sexy and reckless with high ratings and questionable success for a very few. Or we change course over to a commitment to Conserve our Core Financial Resources, supported by long-term thinking whose first priority is a strong foundation that will provide a reasonable amount of stability in people's lives. Or, at the very least, keep the blowups manageable.

To be sure, this approach won't feed the media-cultivated need for the addictive type of hype, "chasing the dragon" thrills that are here and gone in a nano seconds. But it will produce a lot less angst and turmoil over the long term for a far greater number of people.

It's time to Draw The Line!

Like the big guys, you can start by first making a clear distinction between what you consider to be your Core and Non-Core Financial Assets. Then determine how these assets are positioned: either for growth with safety; or growth with risks and the inevitable setbacks that are a part of taking risks, especially in today's economic environment.

Below is a link to the Draw The Line Exercise Worksheet that has been provided for your secure and private use. Take a couple of minutes to type account names only in the column that matches their current status of safety or risk, identifying each account as either a Core or Non-Core Asset. Hit print and you'll get a quick picture of where you now stand.

http://www.financialconservation.com/draw_the_line.php

With this as a baseline, you can make a clear decision to either stay the current course, or head in a different direction.

There are always alternatives.

The choice is yours.

To learn how to implement a crisis-tested strategy for the sustainable growth and preservation of Core Financial Assets, click on the following link:

http://www.financialconservation.com/financial_independence....

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