Making Money Alert
Remembrance of Things Past
10/17/2007
"A change in the weather is sufficient to recreate the world and ourselves."
—Marcel Proust
This week marks a dubious anniversary for the stock market. It was October 19, 1987, a.k.a., Black Monday, when the Dow gave up 508 points. The Dow dropped 22% of its value in just one afternoon.
The crash came against a backdrop of inflation fears, rising oil prices, Middle East tensions and a lot of other eerily familiar circumstances. Fortunately, safeguards subsequently have been put in place to avoid such a huge one-day decline. Nevertheless, the events of two decades ago remind us all that investing always is a risk.
I do think a big slide over a short time akin to what we saw in 1987 can happen again, and that's why I am so vigilant when it comes to cautioning investors about the need to always, always, always manage risk. By the way, in case you haven't heard, you must always, always, always manage risk!
While the Street remembers the events of 20 years ago with deserved fear and anxiety, the Fabian family remembers that time period for a different reason.
In what was to become perhaps the best call in the history of this service, the Fabian Plan generated a sell signal on Thursday, October 15, 1987, which moved subscribers into the safety of the money market (cash). Four days later, it was Black Monday, the single-biggest one-day decline ever.
Fabian followers walked away with gains of 23% in calendar year 1987. The Telephone Switch Newsletter, as our Successful Investing service was called back then, was one of five publications to have predicted the decline as reported by the Wall Street Journal. Of course, we did not predict anything. We simply stuck to our disciplined investment approach and followed the rules of the Fabian Plan.
Sometimes memories are both bitter and sweet.
Superfund Skepticism
Three of the biggest banks in the United States, Citigroup (C), Bank of America (BAC), and J.P. Morgan Chase (JPM) are creating a fund that would buy $75 billion to $100 billion of mortgage-linked securities in exchange for short-term debt.
The plan is designed to provide for an orderly sale of troubled debt and to restore confidence -- and liquidity -- to debt markets that have been stymied since the credit crunch began this past summer.
In a statement, the three banks said that they and several other financial institutions have agreed to create "a single master liquidity enhancement conduit" that will buy "qualifying highly rated assets" from the banks' affiliated funds, also known as structured investment vehicles.
Here's the "money quote" from the banks' announcement this week:
"Access to such liquidity is intended to allow participating sellers to meet pending redemptions and facilitate asset-backed commercial paper rollovers."
That, to me, is a super-slush fund designed to bail out the credit markets. Oh, I also forgot one critical element here. The joint effort by the big banks was orchestrated by the Treasury Department and it basically is the result of weeks of negotiations between bank executives and Treasury officials.
What?
I see this basically as a stealth version of a bailout for investors in subprime loans -- a bailout that was pushed on the banks by the U.S. government. I guess laissez faire is a dead concept to the credit markets.
The coordination by the Treasury Department reminds me of the Federal Reserve's 1998 effort to organize a Wall Street bailout of star hedge fund Long-Term Capital Management.
The more that things change, the more they stay the same.
Now amidst all of this, the S&P 500 has taken a bit of a nosedive over the past three trading sessions.
As I have been saying for several weeks now, this market needs a breather and we have taken that breather over the past few days. I do think a pullback from our recent highs, and/or a consolidation of some kind here is a necessary condition for further upside in stocks.
Remember, markets don't go up forever, and from time to time a pullback is needed just to free up more money that can then be put back into equities.
As this market decline continues, we'll be keeping a close watch on all of the critical support levels on all of the major averages.
If this is the start of something more than a mere pullback, we'll know instantly.
Don't Set Your Portfolio On Autopilot
Everyone wants to buy low and sell high, but most people just buy and forget about it.
I call this putting your portfolio on autopilot, because many people think that all there is to managing money successfully is making sure they buy the right stocks and mutual funds. Certainly, buying right is one critical component, but knowing when to sell is nearly as important.
Ask yourself this question: Do you know when you are going to sell every position you own?
If you can't answer yes to that question, you're putting your money at risk for some serious pain. If you are managing more than $100,000, you really should be committed to protecting principal first. It's only when you are attuned to the idea that wealth, to be created, must be preserved, that you really are on your way to coming off of autopilot and controlling the joystick of your own money.
Remember that hope is not an investment strategy. Have a plan in place for both good times and bad.
If you'd like to find out how to take advantage of this five-year bull market, while simultaneously gaining control of your money when the next inevitable downturn occurs, you need to find out about my Successful Investing advisory service.
Hey, we've been helping investors beat the market for more than three decades, and we'll continue doing so for many more decades to come.
To find out more about Successful Investing, click here.
Wealth Strategies 2008
Do you have the investing skills you need to grow your wealth?
Unless you answered absolutely, positively, yes, you need to hear what our team of experts has to say.
Announcing the WEALTH STRATEGIES 2008 seminar -- a one-day, eight-hour, five-expert extravaganza of investment information.
This seminar is titled: Building A Roadmap to Grow Your Wealth 20% in 2008
It will be held: Saturday, November 10, 2007 - 9:00 a.m. to 5:00 p.m., at the Orange County Hyatt - Garden Grove, Calif.
Important Notice: Early Bird Savings -- Be One of the First 50 to Register and Save $20!
Click here to sign up now and reserve your seminar spot.
Fellow Investor,
The coming year offers unprecedented opportunities for investors to grow their wealth faster than any time since the tech boom. The key to taking advantage of these opportunities is having the right combination of skills, knowledge and information.
Wealth Strategies 2008 was designed from the ground up to give you the inside information that you need to succeed. Let's face it, you work hard, do a good job of saving money and still find it tough to grow your wealth as quickly as you want.
You can't afford another year of subpar returns on your investments. In this intensive, one-day, investor-training event, our dream team of experts is going to equip you with the knowledge and skills you need to supercharge your investment returns. Together, we will present a road map that will enable you to grow your wealth more rapidly than ever before.
In just over eight action-packed hours, you will hear:
Tom Leykis, radio talk show host and self-made multimillionaire, talk about the winning mindset he cultivated to help him become one of the most successful radio talk show hosts in the country, and how he made millions in stocks and real estate by sticking to his controversial, yet very pragmatic life principles.
Doug Fabian, the Money Maverick, revealing the keys to successfully utilizing the most innovative and profitable financial services vehicle ever created.
Dr. Peter Navarro, author, economist and professor, discussing his new book, The Coming China Wars, and how you can profit from the massive opportunities arising from China's disarray.
Josh Lewis, real estate and mortgage expert, explaining how to protect yourself from the housing bear while preparing to profit from the greatest buying opportunity EVER in Southern California real estate.
Keith Fitz-Gerald, International Trading Guru, will show you how to profit from the global opportunities ready to explode as China begins to deploy the government's $1.3 trillion cash stockpile.
If you were to attend individual events with any of these visionaries, you could expect to pay anywhere from $100 to $250. One-on-one consultations with each of these gentlemen run from $300 to $500 per hour -- if you can get on the schedule.
To get all four, in one room, on one day, revealing what they know about turbo-charging your returns and growing your wealth as quickly as possible, what would you expect to pay? How about $1,500, $1,000, or even $5,000? Most investors would be willing to pay that kind of money, but the good news is you don't have to fork over nearly that much.
Thanks to the Wealth Strategies 2008 sponsor, KLSX 97.1 Free FM, the price is so low it will astonish you. You only will pay $99. For only $50 more, you can bring a spouse or friend. With the cost of admission this low, you will feel like you owe the speakers more for everything they shared with you.
But it gets better. If you are one of the first 50 people to register, you can take off an additional $20, paying only $79 or $129 to share the experience with a friend.
Click here to sign up now and reserve your seminar spot today!
Don't miss this once-in-a-lifetime event
Blogs Away: A Fabian Aural & Visual Fixation 7
Want to hear my latest rant on the state of the financial markets? Well, now listening, and even watching, is as easy as a mouse click.
To listen to the audio blog, simply click here.
Not satisfied by just listening? Would you rather watch me on YouTube?
Well, now you can. It's the latest addition to the Fabian bag of tricks, our brand new video blog.
We invite all Alert readers to check it. We assure you it's worth it.
Just click here for your Fabian aural -- and now visual fixation.
FITNESS TRAINING AND FABIAN COACHING 3
I am a big fitness buff, and I've worked with a personal trainer for many years. But before working with my trainer, I still worked out very hard. I hit the weights often, and I went through the motions with a sense of purpose and determination. After about six months of expending a lot of effort, I noticed that I really wasn't making much progress.
Frustrated, I decided to seek the advice of a professional. That's when I met my trainer, who told me that while I was working hard, I wasn't working very smart. After just a few sessions under the tutelage of a real pro, I was able to make the huge progress I was after.
You see, I was doing things wrong in the weight room that I didn't even know I was doing. It took a trained eye with the knowledge and expertise to be able to point out my errors and correct my problems. Once those corrections were made, I was able to take my performance to a whole new level.
I bring up my fitness training story because I think it is nearly perfectly analogous to the way most people manage their investment portfolios. Most people make an effort to buy and sell stocks and mutual funds, but like the novice fitness trainee, most people aren't making the progress they want to make.
The reason for that lack of progress is the lack of a professional trainer. At Fabian Wealth Strategies, we like to think of ourselves as your personal portfolio trainers. We can coach you on how to properly manage your assets, and we can help you get to that new level of performance you're working so hard to achieve.
If you need some guidance in assessing your portfolio's fitness, Fabian Wealth Strategies can help.
All you have to do is call us and schedule your very own coaching session.
For more information about how to schedule your coaching session, call David Fabian at 800.391.1118, or e-mail him.
Call us. The only thing you have to gain is the life you desire.
A Different State of Mind
Oh, Mexico
It sounds so simple I just got to go
The sun's so hot I forgot to go home
Guess I'll have to go now—James Taylor, Mexico
When things get too hectic, often the best thing to do is pull the plug on the treadmill for a few days. A little sun, a little sand, and a little tequila never hurt anyone. Whatever your idea is of a nice respite, I suggest you make plans today and just do it. There's nothing like a different state of mind to clear the soul's debris.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars or anything else.