Commentary: Warning, you can't get back to even, cannot win Wall Street's 'Loser's Game'
Remember Charlie Ellis' famous 1975 classic: "Winning the Loser's Game: Timeless Strategies for Successful Investing?" Like Napoleon Hill's "Think & Grow Rich" everyone on Wall Street has read it.
Well, guess what: Charlie failed us the past decade. Wall Street lost trillions, lost 11% of your money. Adjusted for inflation, Wall Street lost 20% of your money. Warning: Wall Street will do it again by 2020.
First, let's review Ellis' famous 10 strategies for winning at Wall Street's casino: "Never speculate. Your home's not a stock or piggy bank. Save more money. Your broker's not your friend. Never trade commodities. Don't chase hot stocks. Bonds also ride up and down. Don't invest for tax benefits. Write goals and stick to them. Never trust your emotions."
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You probably knew them by heart. What happened? This insider gave you 10 rules for beating the Wall Street casinos ... and still you lost 20%.
But in your defense, even if you broke all 10 of Charlie's rules the past decade and lost 20%, it still wasn't your fault. Wall Street was conning, scamming and manipulating you all along, all day, every day for the past decade. And yet I'll bet you're still an optimist, gullible, trapped in Wall Street's seductive pseudo-optimism, one of the majority of Americans who believe the market will go up 20% or more in 2010, "confident better times are ahead."
Best advice today? Burn Ellis' book. His next edition should be titled: "Losing the Loser's Game: How Wall Street Got Rich Between 2000 and 2009 Because Main Street Investors Are So Gullible, Stupid and Predictably Irrational." You cannot win at Wall Street's "Loser's Game." The past decade proves it. The house always wins in Vegas and on Wall Street.
How Not to Lose 2010-2020? Avoid Wall Street; Don't Play by Their Rules
So why bet on the house? Why bet with the Wall Street casino for another decade? Why? You're betting in a rigged casino. Worse, they keep adding powerful new tools, scams and algorithms to their "financial weapons of mass destruction" arsenal, as Warren
Buffett calls this mysterious $670 trillion global shadow banking world of derivatives. You cannot win.
Statistically, the odds now predict Wall Street losing another 20% of your money in the next decade. The momentum's headed down. So, what should you do? Sell all your stocks, ETFs, bonds and funds. Get out of commodities and gold. Sell.
You think I'm crazy? Imagine: You're a 50-year-old boomer. Flash forward to 2020. Retirement time? But you've lost another 20%, while those Wall Street Fat Cats will be paying themselves record bonuses averaging half-a-million annually for all 10 years from 2010 and 2020 … but you can't retire. They got their bonuses siphoning money out of your accounts.
What do you expects some kind of divine intervention will save you? Get real, consider the "Swiss Family Robinson" scenario.
No, You Cannot Get Back to Even
My guess is you're still smiling about that 60% short-term gain in 2009. You're still an optimist. You really believe you can "get back to even," like Jim Cramer and other hucksters are promoting on the Wall Street propaganda machine.
Yes, your portfolio did ride up on the 60% rebound wave in 2009. You're happy. Short-term gratification. You believe it'll continue. Wrong. You're forgetting the massive losses of more than $10 trillion in market cap the last decade since the Dow peaked at 11,722 in 2000. Worse, you're forgetting the Dow's still about 30% under the 14,164 peak in 2007.
What if you don't sell? What if you take the risk and gamble Wall Street will change its evil ways. What if you ignore me? What if you gamble and you lose another inflation-adjusted 20% by 2020, like you did between 2000 and 2009? Or worse, what if you're close to retiring or putting kids in college, and you lose 40% like so many did in the 2007-2008 meltdown?
Studies prove that nobody -- neither Wall Street pros nor Main Street amateurs -- can predict long-term trends. But we do know Wall Street's high-frequency quant traders are making thousands of millisecond bets every second gambling on short-term shifts in volatile markets.
You got a job all day. They're 24/7 gamblers. They don't have a clue what's going to happen in a decade. Worse, they don't give a damn. It's irrelevant in their 24/7 short-term trading world. Irrelevant to guys making anywhere from 10 times the income of the average American to making more in a single year than you'll make in a lifetime. Irrelevant in a culture that needs no moral compass and lives by one rule: "Greed is very good!"
Eight Reasons Wall Street Will Lose Another 20% in the Next Decade
The world of 2010-2020 is far more dangerous for investors than it was in the "Lost Decade," as many economists now call the years from 2000 to 2009. Listen closely: Here are eight reasons Wall Street will lose another 20%, why the odds are heavily against you "Winning the Loser's Game" by 2020:
1. Foreign policy and wars. The investment world's far more volatile and dangerous today than in 2000 when Bush was elected. America started a preemptive war-of-civilizations by attacking Iraq under false pretenses, the single biggest foreign policy blunder in American history, a war that's had the unintended consequences of playing into the hands of our enemies, made them stronger, and unnecessarily cost us trillions, weakening America as a military and economic power, with no end in sight.
2. Monetary policy and the Fed. Your world of investing is also in a far worse condition as a direct result of former Fed Chairman Alan Greenspan's too-long legacy of free-market Reaganomics ideology funneling endless cheap money to Wall Street banks. Worse, three regional Fed presidents recently endorsed an indefinite continuation of current Chairman Ben Bernanke's cheap money policies, thus accelerating the next bubble. But worst of all, when he had a chance to prove he was a real change-agent, President Obama made the biggest domestic policy blunder in history by reappointing Bernanke, a Greenspan clone, a Reaganomics ideologue and a Trojan Horse protecting Wall Street with trillions in cheap money loans, guarantees and toxic asset takeovers, all hidden from taxpayers.
3. Dysfunctional politics and the Party of No-No. America's unpredictable and hostile political world will also have enormous long-term economic consequences. In this age of online citizen journalism the public is becoming more and more aware of the breakdown of Washington politics and the two-party system, the widening cultural gap between the rich and the rest of America, the exploding conflict between Corporate America and Main Street America and the "GOP Party of No-No's" scorched-earth defense of all-things-business while fighting everything favoring the masses, including health care and financial reforms. Warning: This trend will get far more destructive. The elections of 2010 and 2012 are guaranteed to make your investment world a dangerous no-man's land.
4. Statistics guarantee you will lose at the Wall Street casino. Remember: Between 2000 and 2009 Wall Street's casino was in fact a "Loser's Game" for Main Street investors. The Dow did in fact drop from 11,722 in 2000 and from a peak of 14,164 in 2007 to the 10,400 range today. The fact is, Wall Street's lost an inflation-adjusted 20% of your retirement nest egg in the recent "Lost Decade." And the odds are high they'll lose more of your hard-earned money in the next decade. The game's fixed.
5. Wall Street has absolutely no moral conscience. Wall Street's greed knows no bounds, thanks to the moral hazard endorsed by the Fed and Treasury bailouts, Wall Street's obsession with mega-bonuses for insiders and their addiction to the new high-risk, high-leveraged, high-frequency derivatives gambling game that easily generates $100 million trading-profit days. Their cultural DNA must ignore lending to the little guy, to homeowners, to small businesses, to regional banks, to all the businesses that money-center banks used to help before investment bankers took over. Wall Street's DNA makes them incapable of feeling the pain the rest of America feels in an economic downturn with underemployment near 20%. Wall Streeters have zero moral conscience. Unfortunately, it's guaranteed to get far worse.
6. The 'Third Meltdown' is dead ahead. America is again being propelled to the edge of an economic cliff, already burdened with an estimated $23.7 trillion debt from the misguided political decisions of the past decade. Endless deficits lie ahead. Yet politicians, CEOs, bankers and Main Street folks have all failed to learn any lessons. As Yale's Robert Shiller put it: "Until we understand and address the psychology that fuels" these bubbles, they will "keep forming. We recently lived through two epidemics of excessive financial optimism, we are close to a third episode." To another meltdown, to another Great Depression.
7. Lobbyists fueling America's new 'Capitalist Anarchy.' America's becoming a "socialist" nation? No, the truth is America's becoming the world's first "Capitalist Anarchy," thanks to the explosion of lobbyists running government. This trend shows no sign of abating. Imagine: 42,000 Washington lobbyists today, versus a handful in 1975. Other experts estimate 261,000 of these selfish special-interest "influence peddlers" throughout our nation. And it's so bad the Center for Public Integrity just reported that "more than 1,750 companies and organizations hired about 4,525 lobbyists, eight for each member of Congress, to influence health-reform bills in 2009." Worse: this emerging "Capitalist Anarchy" is draining the Treasury with endless deficits piling up more killer debt that will negatively impact future market returns.
8. Taxpayers cannot afford Wall Street's next bailout. I'll bet you're in total denial about this one. And you can bet Congress will avoid action till it's too late. But when the bomb detonates all hell will break lose. Moral-hazard critics warn that Wall Street's arrogant "too-political-to-fail" bankers actually believe taxpayers will bail them out again when they trigger the new meltdown. Wrong. Even if our politicians are dumb enough, the money won't be there. That scenario will inevitably trigger a new Great Depression. This is our destiny.
In fact, it's highly doubtful that you, your portfolio, your family or your America will make it past 2012, let alone into that comfortable retirement you may be planning for 2020. The Wall Street casino's version of "Liar's Poker" is a "Loser's Game," and the odds are high are they'll lose a lot of your money again in the coming decade.
So again I ask you: Do you really want to bet on the market winning for the next decade? Do you really believe that stocks, mutual funds, ETFs, commodities and bonds will make a profit in the next decade after Wall Street's miserable performance the past decade? Trust them, you lose.