April 2018

What Do Stocks and Cigarettes Have In Common?

By Ray Mullaney
Originally published in Senior Digest

How long do you have to live?

How many years can you wait before your investments give you a profit?

Why do you believe your investments will perform as you hope they will?

On March 19, 1964, the Dow Jones Industrial Average stood at 819.36.
On March 19, 1982, 18 years later, the Dow stood at 805.65.
People who held their investments, their life savings, for 18 years, paid heavy fees and commissions, and earned nothing!

Can this happen again? Of course it can. We do not forecast prices. But ask yourself, how much more would investors have made if they sold their stocks or funds, after the market rose a good deal, put their money in cash and refrained from buying again until after the market had fallen a good amount?

No one can time the market, because no one can know what the market will do. We can’t, and we don’t try. But we can measure risk. Risk is the enemy of safe money. Do you have a super-safe strategy for your “safe money”? If you don’t, why not?

Stocks and Cigarettes

In 1964, 42% of Americans were smokers. It was the “popular” thing to do. Why? Because cigarette companies spent hundreds of millions of dollars on advertising, to convince us to smoke, and to convince us THAT IT WAS SAFE!

However, on January 11, 1964, the Surgeon General issued a press release. He told Congress and America that smoking was linked to many serious health hazards, chief among them cancer, and that the tobacco companies would have to take remedial actions to inform the public and reduce their health risks.

As a result of the Surgeon General’s presentation, tobacco use has declined; only 13% of Americans are smokers today.

We now know that smoking is bad for your health. But sometimes investing can be as bad for your financial health as smoking is for your physical health. Much like the tobacco industry, Wall Street spends many billions of dollars on creating fake news and effective marketing and advertising. Think about how much Wall Street salesmen extract from our economy. What do they contribute? If stocks were as valuable as these salespeople say they are, people would buy them without paying billions of dollars to salespeople!

America doesn’t have an “Investor General” to warm investors of the risks of investing. That’s where we come in. Think of us as the “Investor General”. The percentage of Americans invested in stocks has ballooned from 13% in 1964 to nearly 80% today! More people than ever are in danger of losing their retirement savings when the stock market crashes again – and although nobody knows when, it will crash again.

An increasing number of US companies are using debt to finance their growth. When growth slows, paying their debts will become increasingly harder. This pattern has occurred with just about every major company in US history. Success breeds arrogance. The managers of the biggest companies leave after they’ve ruined the balance sheets of these once-formidable giants. It happened at GM, Kodak, AOL, Sears, Sony, Xerox, General Electric and many other past greats.

Consider the growing financial risks that Apple shareholders are assuming:

Apple Growth of Revenue Growth of Debt
Past 1 Year +8% +31%
Past 3 Years +13% +102%
Past 5 Years +41% +350%
Apple Total Liabilities
2017 $267 billion
2014 $132 billion
2012 $59 billion

These are objective facts. These same patterns are seen in dozens of major US companies; growing debts and falling sales. We point out the growing risks in Apple not to suggest that it will fail, but to highlight the growing risks to its shareholders. Investing risk is like standing on a ten-story roof: It doesn’t mean you will fall, but the taller the building you stand on, the more damage occurs if you do fall. And the closer you stand to the edge, the more danger you are in that a strong breeze could push you the rest of the way off. One stiff breeze and Wall Street will fall. And along with it your retirement savings. Sell now, better safe than sorry.

For free information on How to Avoid Investment Losses, please visit www.FinStability.com.

 “Patience is not an absence of action;
rather it is “timing”
it waits on the right time to act,
for the right principles…”

–Archbishop Fulton J. Sheen