91视频

Dear Mr. Berko: My wife and I each have a 401(k) plan and joint account. Her brother-in-law, a certified financial planner, gives us financial advice and wants us to go to 75 percent cash. He and other well-known experts are certain the market is going to have another Black Monday crash next year, which would kill our accounts. He’s very convincing. But Goldman Sachs, Merrill Lynch, the Federal Reserve and other prominent analysts see steady, slow but strong growth ahead. After what the economy has been through, I can believe it could crash again. But at ages 49 and 47, we’re scared of a crash because we won’t see it coming. What investment advice can you give us? Do you think we will have another crash?

B.R.

Erie, Pa.

听

Dear B.R.: Of course we’ll have another big stock market crash. However, like most folks who don’t understand the market, you make the mistake of ascribing long-term consequences to short-term events. Every time market has crashed, it’s recovered and risen even higher.

In June 1997, page 86 of Business Week Magazine included: 鈥淪ix years into the economic expansion of the 1990s, and the living is easy. Almost 3 million jobs have been added over the past year alone, and consumer confidence is soaring. Company coffers are brimming with profits, the stock market is in the stratosphere and inflation is actually falling. Perhaps best of all, it seems the good times can go on for years. That old bugaboo of capitalism 鈥� the business cycle 鈥� has been tamed.鈥�

We own potbellied pigs, pythons, iguanas, llamas and even alligators as pets. Americans are the dumbest consumers in the free world, and the reason most American families don’t own an elephant is because no one has figured out how to buy an elephant for $100 down and payments of $100 a month. And now automobile companies will finance a $15,000 car over six years at $250 a month, even though in three years that car will be worth only $6,000.

I remember asking a young man how much he paid for his used Toyota? He answered: 鈥�$183 a month.鈥�

That wasn’t the answer I was looking for, so I asked again: 鈥淲hat did the Toyota cost you?鈥� He answered again: 鈥�$183 every month,鈥� with an annoyed look on his face, suggesting that I didn’t understand the King’s English. His father finally told me that the boy paid $17,000 for the car. I’m convinced that that the financial IQ of most Americans is below freezing. We are a nation of consumer stupids who believe credit and monthly payments are entitlements.

Stop wringing your brain in fear of a stock market crash. As certain as the sun rises in the East, it’s just as certain that the Dow Jones average will have another great fall in the West. But unlike all the king’s horses and all the King’s men who couldn’t put Humpty Dumpty back together again, the Dow Jones average always mends itself. So the question is not 鈥渋f鈥� there will be another crash, nor 鈥渨hen鈥� will it crash, but rather if you have the discipline to be a successful long-term investor. And if you have the right investment advice, it’s easy.

At some point, the Dow industrials will crash by 30 percent or more, and the market will have numerous episodic corrections, but all those thunderbolts and volatile jolts are basically short-term changes and just squiggles on a long-term chart. Think of viewing the state of Wyoming while flying 100 feet above the Laramie, Bighorn and Rocky Mountain ranges. Those ranges look like huge, scary, dangerous peaks and valleys. However, if you fly 1,000 miles above those mountains, the terrain appears as flat and peaceful as a flapjack. And so it is with the Dow Jones average. However, looking at a five-year chart, the volatility of the averages is very evident; the Dow has been up and down like a drunk monkey. It’s much less evident with a 25-year chart, and is actually a smooth, slowly rising incline of about 9 percent on a 50-year chart.

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 8303, Largo, FL 33775, or email him at [email protected]. 漏 2014 Creators.com