Layout:
Home > Category: Uncategorized

Viewing the 'Uncategorized' Category

Market Wave Patterns & The Dynamics of Compound Loss

March 28th, 2010 at 07:09 pm

No coin has only one side. Like up cycles, down cycles are an inevitable part of any economy. The Financial Crisis was a harsh reminder of what happens when there is a lack of forward-thinking and priority given to providing reliable safeguards that will automatically kick in and protect your core financial assets when the down cycles arrive.

Because of the unknown timing of when -- not if -- the next down cycles will occur, and to prevent in the future the same kind of life-altering problems that were created by this eye-opening lack of proper planning, we are giving this area the focus it obviously requires.

Surfing the dynamics of market loss. There are two main moving parts to the dynamic of recovering from any losses experienced in the financial markets. First, referring back to the S&P 500 Chart, you can see how the market moves in a fluctuating wave pattern. Bearing in mind that legs are strongest in the first phase of a foot race, if you have experienced any losses in a down cycle, the first and strongest phase of a subsequent market recovery or up cycle, by definition, is not devoted to asset growth, but to the recovery or retracement of those previous losses. Of course, this is assuming you didn't panic during the down cycle and sell out, or were forced to for needed liquidity purposes, thus locking in those losses permanently. Keep in mind that once a position is sold out under pressure and losses become permanent, the producing asset is gone forever.

Secondly, the math of compound loss is now at work. For example, just to get back to breakeven, a loss of 50% would require a recovery gain of 100%.

How do you recover time lost? From a timing standpoint, recovering from market losses that impact Living and Legacy Core Assets can be a very slow moving and deceptively long process that can seriously disrupt your life plans. It's one thing to recover in financial terms, but how do you ever recover the time it took to build assets?