RE: Reverse Compounding
Dear stock,
In response to our message sent yesterday (see below) we have received a number of e-mails inquiring about the performance in the past couple of years.
As of 31-Dec-2009, the Swing Timing Alert portfolio was showing a GAIN of 116.37% since inception on 31-Dec-2007.
The S&P500 index LOST 24.06% during the same time.
Click on this link to see the trade by trade details : http://www.swingtiming.com/performance.php
You'll notice that the Swing Timing Alert has outperformed the S&P500 index by 140.43 percentage points since 12/31/07.
The Portfolio Performance summary page is updated after the end of every quarter. The next update will happen sometime in the first week of April 2010.
A new issue of Swing Timing Alert has been released today (12-Mar-2010) and you can get it instantly by clicking on this link :
http://www.swingtiming.com/order.php
Thank you.
Roger
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Date: 11-Mar-2010
From: Roger Williams
To: stock market
Subject: Reverse Compounding -- An Investor's Worst Nightmare
Hi stock,
For most investors, the Great Crash of 2008 did severe damage
to their investment portfolios.
Unless investors were heavily allocated to cash, treasury bonds
and gold, the majority of asset classes fell sharply in 2008
triggered by the Lehman Brothers bankruptcy in mid-September.
In 2008, stocks suffered their worst calendar year decline
since 1938, dropping almost 40% and 56% from their high in
October 2007, when the S&P500 peaked at 1510.
Unfortunately, the road to capital recovery will be long and,
for the most part, unattainable for retirees who lost a big
chunk of their money in the crash.
Making that money back for those investors who were over-
weighted in common stocks will take a big bull market or at
least a massive bear market rally to recover those awful losses.
CAPITAL LOSS GAIN REQUIRED TO BREAKEVEN
10% 11%
20% 25%
30% 43%
40% 67%
50% 100%
60% 150%
70% 233%
80% 400%
90% 900%
The table above depicts the sobering mathematics of capital
losses starting with a 10% loss and the gain required for
breakeven, that follows all the way down to the depressing state
of affairs after suffering a 90% loss on your portfolio.
The latter affected most investors after the 1929 October crash
and the corresponding bear market that ensued for the next 36
months until stocks bottomed in mid-1932.
By that time, the Dow Jones Industrials Average had collapsed a
cumulative 89% -- the worst bear market in history. If you
bought stocks at the market peak in 1929 then you had to wait 27
years, until 1956 to break-even or a cumulative 900% total
return.
From its high in October 2007, the S&P 500 index sank 56% and
will require a 127% cumulative return for those investors
looking to make their money back. The odds of this happening,
however remote, are possible.
Even amid a crippling economic depression in the early 1930's
the Dow managed to gain almost 375% from mid-1932 until early
1937 before crashing again. But the Dow did hit a secular low of
41.22 in the summer of 1932.
Similarly, after tanking almost 60% from its all-time high in
October 2007, the Dow hit another low in this bear market on
March 9, 2009. Whether this was THE low in this bear market has
yet to be determined.
Still, the odds of a quick recovery in the stock market are not
good. That's why investors like Warren Buffett hate losing money
because the consequences of reverse compounding or capital loss
is formidable and, in some cases, can require a decade or two to
recover principal. Yet even the Sage of Omaha has seen his
venerable Berkshire Hathaway Class A stock plunge a cumulative
43% since hitting all-time highs in late 2007.
If there's one important lesson to learn from a crash in
capital markets, it's the virtues of asset allocation. This
means investing your assets across a broad spectrum of asset
classes that should maintain a low-to-negative correlation to
each other.
And though most asset classes did correlate positively in
2008's global carnage -- an exceptionally disastrous year --
treasury bonds, the dollar, gold, managed futures (CTAs),
reverse-index funds and some macro hedge funds posted impressive
returns offsetting losses in stocks and most credit markets.
The best long-term investment strategy is to avoid stock market
index-hugging. Instead, you have to find a reliable way of
avoiding catastrophic bear markets and even profiting from these
events, when everyone else is losing their shirts and crying
their heart out.
How your money is managed going forward will be critically
important -- particularly if you want to avoid getting caught in
the same portfolio traps of the recent past.
No matter where you are invested, you owe it to yourself to make
the best decisions possible.
Now more than ever, you need to determine if you have prepared
your assets for the bumpy financial road ahead.
I invite you to click here to try an alternate investment
strategy : http://www.swingtiming.com/order.php
Whether the stock market rally falls off a cliff or soars to new
highs you want to be properly positioned to profit.
Click on this link to find out how to make money in BOTH up and
down markets :
http://www.swingtiming.com/order.php
To Your Success,
Roger Williams
Chief Editor
Swing Timing Alert
P.S. Click on this link to see all the 10 bonuses :
http://www.swingtiming.com/order.php
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