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The Shocking Truth About Professional Investment Advice
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. investment firm manager regarding his concerns for a likely severe correction in U.
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. Treasury Bonds In January, 2007, on my blog at http://www.theUndergroundInvestor.com (perform a search for "U. 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. corporate bonds or U. 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. 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. Treasury bonds as financial consultants incredulously urged their clients to shift out of stocks into U. bonds.
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