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The Shocking Truth About Professional Investment Advice
J.s. Kim
Most investors, because they pay huge fees every year to investment firms, put blind faith in their advisors and believe that they will do the best thing for them. The media confirms the advice dispensed by commercial investment firms because they ?tout? in tandem. Then when investment crises happens, the cries go up. ?Who could have seen this coming??, ?This is an absolute shock!?, ?Nobody could have predicted such a severe correction!? But here's a secret I'll share with you. Not only has every single investment crisis in recent history been readily identifiable by multiple cracks in the pillars of the foundation that supported past unsustainable stock market runs, but every investor had plenty of time to prepare their portfolios to massively profit from these crises instead of suffering massive losses. The problem is that most professional investment advisors will never tell you that a crisis is coming. In fact, most will do their best to hide the fact that a crisis is coming from you.
Below I'll explain why and how you can avoid being crushed by the weight of the next investment crisis that is just now reaching the tipping point.
Example #1: Black Monday
The other day I came across an interesting piece in which a financial consultant recalled a discussion he had with a U.S. investment firm manager regarding his concerns for a likely severe correction in U.S. stock markets in August, 1987. When he issued his forecast, his manager ?urged? him to retract it. He recalls their conversation as follows:
"Peter, 90% of our clients will never sell all their stocks as you suggest. They will look to keep some, if not most. If you end up wrong, and I believe you will be, they will?never listen to you again'If you end up right, they will be in no position to take advantage when you decide it's time to buy stocks again. Now let's look at the 10% who may listen to you. I'll bet half of them will be too scared to jump back in when you tell them, leaving only 5% of all our clients benefiting from your advice. Peter, no firm on Wall Street can survive with only 5% of our clients profiting from our advice.?
The above statement is ludicrous for the following reason. There is always a bull market somewhere. If the manager knew how to advise his clients how to profit from calamity, 100% of his clients could have profited. Instead, they all lost. Just months later on Monday, October 19, 1987, the Dow Jones Industrial Average (DJIA) dropped by almost 23% in one day and global stock markets followed: Hong Kong plummeted by 45.8%, Australia 41.8%, Spain 31%, the United Kingdom 26.4%, and Canada 22.5% - all in a couple of weeks!
Example #2: Enron
In March, 2002,UBS Paine Webber financial consultant ChungWu advised his clients to liquidate Enron stock due to numbers that "indicate[d] liquidity problems and decline[s] in trading margin." UBS had very close business ties with Enron, and Patrick Mendenhall, a UBS branch manager, responded just hours later by firing the financial consultant (CNN, March 26, 2002). Of course, several months later, Enron declared bankruptcy and Enron stock holders were left holding worthless pieces of paper.
Example #3: U.S. Treasury Bonds
In January, 2007, on my blog at http://www.theUndergroundInvestor.com (perform a search for "U.S. Treasury Bonds" to read the entire article), I wrote the following: ?Many people think of any type of dollar denominated bonds, whether they are U.S. corporate bonds or U.S. Treasury bonds as a safe place to park your money for reliable sources of income stream?Many people believe this rubbish because they are advised of this by a horde of financial consultants that have zero understanding of how the political-corporate-banking triumvirate? has produced a most unattractive likely scenario for dollar-denominated bonds going forward from 2007.? I outlined 9 reasons why U.S. Treasury bonds were a poor investment and stated, ?When people finally realize that [reasons] (1) through (9) are true, there may be a flight from the bond market, causing bond prices to tumble.?
When global market panic ensued this past July and August and there was a flight into U.S. Treasury bonds as financial consultants incredulously urged their clients to shift out of stocks into U.S. bonds. In September 2007, foreign holders of U.S. Treasury bonds dumped their holdings at a record pace unseen in 7 years. Obviously, Central Banks are seeing quite a radically different picture than the one investment firms are presenting to their clients.
The reason I prefaced this article with the above three examples is to prevent investors from making the same mistakes in regard to a much greater investment crisis that is at our doorstep today. A global liquidity crunch will expedite a dollar crisis and trigger severe declines in U.S. markets which will spread general malaise to other global markets, though damage to U.S. markets will be the heaviest. This will be a sustained decline that will not experience a rapid recovery. The same signs of impending calamity exist today and the same huge profits can be made crisis if you act now.
I can't tell you how many times I've run into someone after talking to them six months to a year prior, and they state, ?I wish I had done what you told me to do.? When I inquire why they didn't, the answer is always the same. The talking heads at the huge commercial investment firms were telling them to do something different. Skepticism has always been misplaced among average investors. They continue to blindly follow the advice of their firms and touts on televised financial programs.
Though I know very few people will follow this advice, I will still provide it. If your investment portfolio is currently diversified and invested in traditional stocks, it needs to be radically altered into a commodity based portfolio, primarily concentrated in gold, silver, oil and uranium with the highest concentration in junior gold stocks. I'm not suggesting that everything should be shifted at once, because with commodity based stocks, your timing must be correct.
If you've been invested in gold stocks and haven't made money, it's most likely because you're not invested in the right stocks or your timing was very poor. Portfolios that I advise are currently up almost 45% in the last 17 months. However, the party is still to come. Due to the impending crisis, the best performance by leaps and bounds, still lies ahead. Yes, that means that I fully expect a year or two ahead where my portfolios will rise by 65% or more in a single year, and if you invest in the stock markets, there will come a time soon where you will either be losing great value if you are traditionally invested or reaping huge profits if you are concentrated in precious metal stocks.
It's time to ensure that you don't make the same mistake as investors who listened to their advisors before the stock market crash in 1987 and the dot com crash of March 2000. Prepare now and profit or stay the course and lose great wealth. To learn how to prepare, join the Group "Crisis Investing" on Facebook.com.
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