Last week, one of my pals, Jeff, bumped into a friend he had not seen in a while.  Soon enough, the topic of the real estate market came up in their discussion.  Jeff asked how his buddy's wife's business was doing, knowing that she worked as a realtor.  The answer he got was something like - "Well, you know, years ago things were humming along just great, but then the bottom fell out."  At that point I was about to jump into the conversation and say how ridiculous I thought it was to make a comment that the “bottom fell out” of any market without comparing the situation against the 80% hit the Nasdaq Composite took and the 50% hit the S&P 500 Index took during the 2000-2002 bear market – the worst bear market modern man has seen!  I kept my mouth shut because I didn’t think it was time for a “pity party”, and I didn’t want to make light of anyone else’s struggles by bringing up the challenges we have endured in the investment industry.

Truth is, a lot of ordinary people I know in Florida are not content and many are not at all comfortable with the status quo in terms of high property taxes and ever-higher insurance rates.  And it is true that many ordinary families are facing financial challenges that extend way beyond higher energy and higher food costs.  But remarkably, in the midst of “such trying times”, the Dow Jones Industrial Average is at record highs.  Perhaps the reality is that the Dow’s record-hitting feat is truly unremarkable. If kept relative to the way the prices attached to so many other things in the world have ratcheted higher, such a view becomes much easier to buy into.  

Recently I was told by friends that work at the South Florida Business Journal that their editors are looking for guest columnists to submit articles. Particularly, I was told that they were very interested in stories that uncover any angles where ordinary investors may be vulnerable to a considerable financial downslide directly related to the stock market.  In what ways could it be possible for a catastrophic collapse?  Globally speaking, couldn’t the US stock market be vulnerable to considerable damage deliberately brought on by our enemies, or terrorists.  Could it not all just as easily unravel as a result of some stupid people using flawed systems?

Perhaps some of the writers at the South Florida Business Journal are concerned by Bob Marley’s prophetic warning offered in the reggae hit, “I Shot the Sheriff”.  In it, there are the looming consequences for a repeated action, as “every day the bucket goes to the well,” but indeed, after a long enough time, “one day the bottom will drop out.”

Investors need not worry a lot about the bottom falling out of the “bucket” that is the stock market.  If they follow the CAN SLIM® investment system’s rules, they’ll limit losses in their stocks at 7-8% and won’t let the bottom fall out. 

Really, the greater problem to be concerned with is that the bucket already has some very serious holes.  One of the bucket’s holes is the IRS, draining off more than a quarter of your winnings each year.  The good news is, when you invest your money inside of a tax-deferred retirement account such as an IRA, you can keep a substantial portion of your profits from being drained off every year.  Contact our offices if you need help maximizing the performance on your IRA.  You may find better returns with the hands on advice and unique-to-each-client approach of working with me and my team at Source Capital in Lighthouse Point, Florida.

The way I see it, there are many angles where ordinary investors are not only vulnerable, but they are, and they have actually been subjected to an ongoing and considerable financial downslide.  It is clear that, in recent years, American investors have been on a slippery slope, where inflation is undeniably eroding our dollars’ buying power.  I believe the worst thing you can do is nothing at all.  You have to produce gains that match or beat the pace of that erosion, or else you are falling behind.