Wall Street types are often referred to as sharks or wolves, and for good reason, they will eat you alive. They will keep your head spinning with charts, graphs and other visuals. The jargon is designed to keep their shenanigans a mystery. They will refer to “retail investor panic” in derogatory terms while in fact it is them that cause the market to gyrate if the Fed Chairman farts. “The DOW rose today on news that we fabricate solely to advance our own narrative…”

They will have you convinced that it is only learned professionals with their technical analysis that can decipher the black magic that is the markets. Bull hockey. I have 3 charts from the past 20 years that lay bare the folly of Wall Street’s conventional wisdom, or lack thereof. The top chart of the DOW, S&P 500 and the NASDAQ is a good example. Large cap or small cap, aside from the valuations, those 3 indexes have moved in lockstep for 20 years!

The next chart (below) involves a couple of indexes showing what their “foreign diversification” does for you, nothing. You can see from the dips in ’01 and ’08 that there is complete correlation with U.S markets! So it just doesn’t matter! Small stocks, big stocks, domestic stocks, foreign stocks, when the market is going down, we all go down. Its a little depressing really. It doesn’t matter how smart  you are or how stupid you are. How bold you are or how timid. How patient you are or how impulsive you are.

Unless the overall market goes up, you’re not going up. If the overall market goes does down, it doesn’t matter how diversified you are, you’re going down. The only advice worth a darn is the one about staying liquid. You have to keep a sizeable reserve of cash to pour into the market during major downturns (and the ability not to listen to the press when it does). During the last 45 years there have been just 4 major corrections (buying opportunities) that mean the difference between a so-so retirement and a “wow” retirement. Depending on how you play them.

Put another way, 1929 wasn’t the greatest market disaster the world has ever seen, it was the greatest buying opportunity the world has ever seen! If you had kept a percentage of your money in cash. You can’t be 100% invested in case of a crash. 

Those were the periods around ’73, ’87, ’01 and ’08. The press tries their darnedest to get people to leave the market during these times with all their doom and gloom and end of the world talk. When in reality, if you had kept a bundle of cash to invest at the bottom of those 3 market corrections in that 21 year period from ’87 to ’08, your returns would have to be at least 3x someone who bailed. Corrections are those once in a decade opportunities that make or break a retirement portfolio. In both cases the S&P 500 in the 5 years following the ’01 and ’08 crashes had 50% earnings. Essentially all the growth for the 20 year period.

The bottom chart is one of the most illustrative. The blue line and the gold line compare 2 T Rowe Price funds at opposite ends of the spectrum: Blue Chip growth versus Small Cap growth.  You can see for yourself their returns over a 10 year period were virtually identical. So much for diversification. After looking over the charts of many, many stocks, funds and indices, I can’t help but think when you throw out all the mumbo jumbo, it comes down to one thing; buy low, sell high.

The last thing to note about the experts, is they never see a crash coming. They are wizzes at predicting yesterday, not so much about tomorrow. They rarely pick a single stock correctly, let alone the hundreds of holdings in a mutual fund. Once you do find something completely independent of the markets like crypto currencies, the first thing the feds do is move to regulate them. They do not like anything they don’t control.

Small growth fund versus Blue Chips (T Rowe Price)

[This post was written on September 30. On October 10 there was an 800 point selloff on the DOW and another 350 expected today (Thursday October 11). The simplest example is all the thousands of Mutual Fund managers running around talking about their “well diversified portfolios”. My ass. After the sell off in US markets Wednesday, the entire globe had a virtually identical selloff. All markets, all sectors. It just doesn’t matter. CNBC then spent the day trying to scare people out of the market thus locking in their losses. That is utter nonsense. Buy at – 20%, buy more at – 30%, and if the market hits 13,000, put everything you own into it. And, after listening to the guests that Greg Hunter interviews on YouTube, he has confirmed my assertion that there is no free market. Equities are being manipulated by computer program traders, gold selloffs and currency manipulations.]