Dow Jones August 27

A perfect storm is brewing, and as with any hurricane warning, it can blow right past.  However not being aware and getting hit, can be devastating.   Here is what is happening.

  • Corporate profits will be under projections because purchases are under projections. After all, at this time last year we didn’t have the 2.5% Social Security Tax.
  • Attacks on Syria could cause an oil spike on the global market,
  • The Sequester continues tightening its belt even more beginning in September as all departments try to hit their low budgets…
  • Another debt ceiling crises, this time over Obamacare.  Government shut down.
  • Stocks have fallen off their highs, and only good news can bring them back.
  • The Fed is looking to raise interest rates.
  • New outbreak of Bubonic plague.
  • Possible collapse of student loan debt.
  • Banks too big to fail in 2008, are even bigger now.
  • % of Wealth in the top 1% equals that of 1929

Safe is better than sorry.  I’ll put more on this later, but, really, things are looking worse than just before 2008. Those are the big ones.

To have political crises and economic backtracking hitting at the same time, could create a rogue wave and cause one of those major drops. When the stock market dropped in 1929, know one really knew why.  It fell in September, then went back up. Then fell again in October, several days in a row, and went back up, then fell gradually until 8 months later when it finally hit its low.

Here is what you need to do with your IRA or 401K if you have never made an adjustment before. …

Call up your plan administrator at your workplace.  Their name will be on the literature you get quarterly.   They are your employer’s liaison with the investment company. Ask them if you can switch your accounts back and forth.  Almost all plans today allow it.  Your administrator herself has done it many times so ask them if it is easy. Ask them if you can move your volatile accounts over to safe ones.  Ask them how it is done. Here is how doing so saves you money.

Stocks are volatile. Treasury Bonds are solid.  Good stocks can give you a good return on your investment,  Treasury bonds have flat growth and should only be used to protect your money during a collapse.   Stocks are only as good as what people will pay for them.  Treasury bonds have a regular rate they pay out over time….  Stocks can become worthless.  Treasury bonds are the safest investment ever.

So if the stock market loses  30 percent and you have a value of $100,000 saved up for retirement, that is now $70,000 dollars.    You lost $30,000 in your portfolio’s worth! Now if you move your money over to Treasury bonds now while stocks are high, that $100,000 stays at $100,000 while later, everyone else drops down to  $70,000.  As the stock market plummets, drops, and drops some more, you have “no worries mate”, your money  stays right where it is in value….

Then, when the market reaches it’s lowest point and turns back around, you get out of your Treasury Bonds and again invest in all stocks.  As each of those stocks rise, so does the value of your investments.  So you go in at $100,000 and as the market rises its 30% back to where it was, you net a value of $30,000, and your total worth is now $130,000.

Those suckers who didn’t switch, saw their value drop to $70,000 in the crash.  After several years in recovery, they will finally return to the value they once had prior to the big drop, whereas you, by not losing your money in the first place, have actually grown your money….

But what if you pull out and the market keeps climbing instead, and doesn’t fall? Should the market defy all the negatives I mentioned above (it won’t),  your value will not drop, it will however stay at $100,000 while others in the market climb with the value of their stock. You may lose $1 ,$2, or maybe $3 thousand of what you could have potentially earned,  but that is a long shot and long shots never happen.  Even if it were, still that is a small price to pay to insure you won’t lose $30,000 in the next two months.