Whatever happened to the Stock Market Cycle; the Interest Rate Cycle; Baby Jane? How did Wall Street get away with pushing these facts of financial life down the basement stairs? Most investors, I'm beginning to believe, and all financial advisors, media representatives, and market gurus have abandoned these fascinating curves for the comfort of a straight-edged twelve-month playing field... simple, yes; realistic, not. I have to wonder if things would be different with a more investor-friendly tax-code, but that would be far less lucrative for The Wizards...

Investing with a calendar year focus has no basis in the realities of finance, business, or economics... isn't it obvious that the Stock and Bond Markets are far more closely related to the Business Cycle than to the Earth's around the Sun? Investopedia reports that, during the last sixty years, most business cycles have lasted three to five years from peak-to-peak. The Stock Market Cycle (in terms of the S & P 500 Average) is the period of time between the two latest highs of that average which are separated by at least a 15% decline in the average. The second high needs only to be 15% above the nadir, it doesn't have to represent a new All Time High (ATH). Interest rates (based on the 10 Year Treasury Bond), seem to cycle in the two to five year range, and are much more closely related to Business or Economic cycles than they are to the Stock Market Cycle. Confused?

Well, you should be. Although they are closely intertwined, none of these financial realities are predictable and, therefore, need to be dealt with as hindsightful tools in the performance analysis process... a process that needs to be undertaken using personalized expectations. How many times in the last 20 years do you think that any of these cycles peaked on a December 31st? The "I'll try this approach for a year or so and then change if it doesn't work out better than everything else" mentality, combined with a regressive tax code that rewards losses more than gains, has killed cyclical analysis dead. It's time to get back on our hogs and try something old. Let's re-cycle peak-to-peak analysis like we do plastics and paper products. It might just put more "green" in our retirement programs. As recently as 1980, Separate Account (the first Mutual Funds) Investment Managers were reporting fund performance in terms of income generation and peak-to-peak growth in Market Value. But that was before investing became the number-two spectator sport in America.

Few investment professionals would argue with the observation that a viable investment program begins with the development of a realistic plan, and most would agree that investment planning requires the identification of long-term personal goals and objectives. Some experts would even agree that the end result should be a near autopilot, long-term and increasing, retirement income. Asset Allocation is used to organize and control the structure of the portfolio so that it operates in a goal directed manner. Is this easy or what! It would be if the average investor would just let things alone long enough for them to work out according to the plan. That's the rub. Wall Street, the financial media, and financial professionals (including CPAs) have no interest in letting things work out according to plan... even if it's a plan that they designed.

Page 1 of 3 :: First | Last :: Prev | 1 2 3 | Next