Saturday, January 31, 2009

Introduction to the Financial Rant Series

These are confusing times when it comes to the economy: Where's the next big layoff number coming from? What's my company going to do? What the @#$% happened to my 401K – or is it a 201k? What's the stock market going to do next – do I wait it out to make my money back? And do I really understand what a Credit Default Swap is?

I'm finding myself increasingly compelled to write about my perspectives on the financial markets and the economy. I'm certainly not an economist, but I have a better than average interest in the markets. By the way, aren't economists in charge of making effective economic decisions to ensure a healthy economy? What's up with that? There's an overwhelming amount of information floating around about the current economic crisis and I have been frustrated and disturbed by the lack of accuracy and timeliness with popular reporting. The challenge, as with any analysis of the news, is how to sort it out to make effective decisions.

I'm concerned that as a nation, we don't have an effective strategy in place for supporting the demands of retirement and we need to have a more active dialogue about developing a framework for supporting post-employment lifestyles. In today's world you MUST be an investor in order to survive past that last paycheck, yet there are inherent barriers for individuals to become successful at this. One of the observations I've made over the last several years is that the average retail investor doesn't realize the extent to which the deck is stacked against them. The reality is that huge money, massive political clout, staggering computing power and many of the finest minds in the world are competing to funnel money into their own pockets and out of yours. As an active trader, I can tell you that the markets are designed to hurt as many people as possible and their application as an investment vehicle is secondary to their true function in society, which is to shift risk. In a later article I'll get into the mechanical reality of what the individual investor faces when they enter the markets, but we'll get there in good time.

In this series I'd like to lay out my analysis of the longer term economic picture and how it will affect the financial markets. For many reasons, I believe that the Stock market is setup to underperform for an extended period of time and I'll be exploring the rationale of that belief system. Some of the key components to it are the impact of a long term economic valuation cycle that is currently playing out, the maturation of the ERISA act of 1974, and the collapse of investment capital at a time when retirements are accelerating and catalyzing investment redemptions. I'll also take a few moments to rail against the Wall Street establishment, but probably not for the reasons you might think.

'Til next time…

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