Trading with the Enemy, What it Means for the Market

My Dear Reader,

With the trouble brewing in the Ukraine scandal taking up much of the media’s time, I can’t help but wonder how the ongoing trade war with China is effecting the stock markets this October.  While it is typically month of volatility, just check out what happened in 1929, this month is off to a horrible start due to some rather predicable causes.  As Warren Buffet famously said “The market is based on fear and greed.” Fear is caused by uncertainty, and in an era where a President is under investigation and a trade war is raging against the Chinese, uncertainty is the only thing that is certain.  Its no surprised this October is off to a rocky start.  But there are two points here that have led me to pen this little piece to you today.

The political uncertainty in this era has made market predictions much more difficult than they were before.  Unfortunately with the low rate environment, savings accounts and bank investments have forced many retirement savings into the market. I believe that Grandma and Grandpa shouldn’t have to risk their savings in the stock market, but the truth is that banks haven’t paid out high interest rates in years. The safe investment in bonds and CD’s won’t come close to covering the cost of inflation, let alone taxation. The volatility in the market itself and the opportunity cost of every market crash will take away untold dollars from us forever, but options for the average American to even stay at the same income in retirement that they earned while they were working, are limited. I don’t think that this solution is coming very soon either.  We have a political climate that is much more suited to grandstanding and lambasting opponents than actually producing results.  No one wants to deal with inflation and no one wants to deal with broken old age security programs.  No one wants to deal with the communists and no one wants to deal with the retirement crisis.  No one in politics that is.

The second and most important point here is that solutions to an unpredictable investment market will come from personal solutions.  Here are a few that could help you until the market stabilizes.

  • Gold- While precious metals are not as popular as they once were, gold has always been a counter to inflation. Gold is also a great way at improving you position in a down market.  Never buy it in a bad market, because that’s when everyone else is buying it.  It’s rate of return is low however, so be careful no to put all your eggs in one basket!
  • Real Estate- While pricy to get into, if you buy right, you can really clean up in a down market. Larger apartments are great at earning when the housing market crashes and will still produce in a good market.  It’s also a great ego boost, but make sure your calculations are right before you buy! If not, it could spell doom for years.
  • A solid base in the private reserve strategy- While most “gurus” will tell you to avoid banking on yourself, it is used by Bank of America, Michael Dell and millions of other entrepreneurs for a reason. Without it, you may be stuck investing in an unpredictable market.

Here’s to a great final quarter, and to your creation and potential,

Kevin Prendiville