“As a passive investor, when an event causes your investments to lose value, please believe someone finds it.”
The World Stock Markets will likely crash in the near future. Like 2017 or 2018 kind of near. And when it does, YOU, as a passive investor of your retirement funds in the market, Will Lose. Guaranteed. All of the signs are there. But if you fail to pay attention to them, you are asking to be a victim to the Investor’s class f*ck Sh!t, again.
If you are one of the millions in the Wage class saving for your own retirement in a 401K, IRA, etc.. you’re about to gift all of your recent gains, as well as a chunk of your principal, to some trader’s | broker’s bonus check or some Billionaire’s capital gains.
How you ask?
Well, here is where I attempt to distinguish myself from all other personal finance bloggers and show you how we are actively exploited within this system, instead of aiding the system with your oppression for my personal gains. [Which I very well could do, and I could do it well. I am just simply not about that life.]
I need to start with a short history lesson, but first, let me define some terms. [Also, make sure to click the links throughout this post for sources and definitions.]
Market Correction: A correction is a drop of at least 10% in the market from its 52-week high, to adjust for an overvaluation. They are generally a temporary disruption to an uptrend and tend to be caused by an event that creates panicked selling. [Like when you’re new president was ‘elected’]
There are many corrections each year. It is a chance for active investors (Investor Class) to dump their shares and pick them back up later, at the expense of the passive investors (Wage Class).
Market Crash: A crash, on the other hand, is a drop of at least 10% in a single day, which then leads to a recession | depression | civil unrest | property loss, and the like. These used to occur less frequently. But as you will see below, they are occurring at a higher frequency.
What had happened was, the P/E Ratio too damn high!
Between 1929 and 2008, the US stock market has crashed 4 times; 1929, 1987, 2000, and 2008. I am not including US Market crashes prior to 1929 or Market crashes that stemmed from other countries. Do you notice anything about the frequency? 58 years, 13 years, 8 years…
In 2008, the market lost over 50% of its value when the housing bubble finally burst. This wasn’t the first time an asset bubble caused a recession, and sadly it will not be the last. There are asset bubbles as we speak, just read through the front page of any financial market website and see for yourself. Also, don’t think that Wall Street, the Fed, or the Government, wasn’t aware of what was happening. They were and are very aware, they simply chose to not care about the consequences to the economy because greed has a propensity to cloud one’s judgment. They were very much aware of all the bubbles, especially the ones bubbling up right now. In fact, you can argue that they are actively responsible for creating the environment that leads to these recessions…
Collateral Damage
Over 9 Million ‘Homeowners’ lost their home to foreclosure as a result of the 2008 Market Crash. Many of the borrowers were unjustly foreclosed on, even though the bank which ended up with ownership of their mortgage, could not even find their original loan documents. And it wasn’t just people who purchased homes with 0% down or balloon loans either, there were homeowners who had their home for over a decade and lost it because they lost their job. Or the value of their home drastically declined and they ended up underwater on their mortgage and could not refinance as a result.
History shows that your government does not care about how market games and speculation impacts us, and the 9 Million Americans that lost their homes is the proof in the pudding. Why else would they bail out the institutions who directly caused the crash at our expense while allowing us to feel the consequences of their actions? Oh right, “too big too fail” which is code for is too powerful to jail, I mean fail 🙄. I implore you, whatever you do, do not rely on your government to do anything to prevent this from happening again. They will not. It is your responsibility, alone, to educate yourself and your loved ones, on how and why this is happening. You are the only person that suffers from not doing so.
The 401k Scam
“The nation’s 401(k)s and IRAs lost about $2.4 trillion in the final two-quarters of 2008, and the average loss that year for workers who had been on the job for 20 years was, according to one estimate, about 25 percent.” I know a couple of older people who were near retirement age and lost nearly half of the value in their retirement account.
2.7 Trillion dollars in wealth vanished from retirement accounts by the end of the recession… $2.7 entire TRILLIONS…or did it?
If you are unfamiliar with how the market works at a fundamental level, you might think that the $2.7T actually did disappear. And you would be wrong. As a passive investor, when an event causes your investments to lose value, please believe someone finds what you lost. The Investor class, contrary to lies we are sold, are not actually able to live off of their investments because they are passive investors; They are not wealthy because of dividends; And they certainly don’t hold on to their investments for decades, unless of course they own the company.
If you watched The big Short, you are aware and have seen in action how it is that the Investor class makes money on the market whether it goes up, down, sideways or upside down. The Investor class, they hedge their bets with financial derivatives like Call and Put Options. Yes, BETS. That’s what the Stock Market is for them. It’s like a casino. They bet that this stock price will go up, so they purchase a call option, or they bet that that stock will go down, so they purchase a put option.
Derivatives are not even their best armor because it pales in comparison to the machine algorithms and teams of Day Traders flipping their money on the global market around the clock… At least we ALL have the capacity to LEARN about and use derivatives to our own benefit! How many of us can actually pay for a Trader’s salary? or better yet, purchase a trading platform with algorithms looking for arbitrage opportunities across FOREX markets?!
However, they have successfully convinced the Wage class, with the help of the media, that you can actually build wealth as a passive investor, that will sustain you during retirement or help you retire early, by saving 5% or 10% of your income and putting it in a mutual fund for 40 years… Think about it, do you actually know someone who is retired today, and thriving off their own retirement account alone? I certainly don’t. But I do know of a few 70 year-olds working as Walmart greeters because of what the 2008 recession did to their 401k’s…
The bottom line? We can’t hedge against inflation and losses without ACTIVELY managing our investments. It’s impossible. And the fees that you are paying on your bs mutual funds does nothing but eat up your gains. So stop falling for the OKEY DOKE and start thinking about alternatives to the markets. Unless of course, you are perfectly ok with gifting chunks of your money to the Investor class every once in while. Can you feel the exploitation yet?
But, will any of this information even matter if this next crash is as catastrophic as predicted? I don’t know…
AFRICAN CURRENT$EE 