Making Money Alert
Wile E. Coyote and the Market Road Runner
11/15/2006
Since the lifting of last Tuesday's election uncertainty, the major market indices have continued their upward march. The Dow still is treading on the path which has led it to new all-time highs, while the S&P 500 and NASDAQ Composite continue their aggressive move into winning territory.
You might think the current strength in this market is something we should all be excited about. Well, if you've been in stocks for most of the year, then you most likely are holding on to some unrealized gains. Bravo! Just be careful that those unrealized gains don't evaporate into the ether when this market starts to come down from its lofty heights.
If you are holding significant portions of cash in your portfolio right now, and if you are reluctant to jump in the market here, then I say you are thinking like a smart risk manager. You see, putting money to work in a market that, by most accounts, is way overbought doesn't make a whole lot of sense.
Sure, generally speaking it is smart to buy into stocks as they begin an uptrend. But it is not smart to buy into the market when that market is way above its short- and long-term moving averages.
In the chart above, courtesy of my friends at StockCharts.com, we see the S&P 500 trading WAY above its 50- and 200-day moving averages. We also see that the RSI, or the Relative Strength Index, is now at 68.92.
Historically, when the RSI reading is near or above 70, the market is considered extremely overbought. When the market becomes overbought, i.e., when everyone is scooping up equities pell-mell, it's a big red flag that a potential trend reversal is near.
My friends, you don't want to be like Wile E. Coyote chasing the Road Runner here. The investment of money in an overbought market usually results in a loss. Often, that loss can discourage an investor from ever thinking the stock market is "beatable." The result is, in many cases, a complete turning away from the power of stocks to grow your net worth.
If Wile E. Coyote was an investor, he constantly would be chasing profits in vain during overbought markets. An overbought market is similar to a Road Runner, since you never will catch them. And, you'll always crash and burn trying.
Do you want to learn how to protect yourself from making investing mistakes that can crush your wealth? To find out the secrets to protect principal while still achieving market-beating gains, check out my Successful Investing advisory service. I guarantee it will keep you from acting like a market version of Wile E. Coyote.
To find out how to get started with Successful Investing, click here.
NEW SPECIAL REPORT AVAILABLE NOW! 8
Worried about managing risk in this uncertain political and economic climate? If you aren't worried, you should be. The risks we all face right now require sound financial stewardship. These days, you just have to know how to protect yourself.
That's why I want you all to go to www.fabianfinancial.com for your FREE Special Report titled, "The Successful Investor's Guide To Managing Risk."
This Special Report outlines the seven biggest threats to your financial nest egg and how you can best mitigate those risks by employing the strategies that have helped protect Fabian investors for nearly three decades.
If you invest, then you need to worry about risk and "The Successful Investor's Guide To Managing Risk" will help you do just that.
ONE MORE DAY UNTIL "FREEDOM"
Folks, there is only one more day until freedom.
Of course, I am not talking here about emancipation in the political sense. Rather, I am talking about there being just one day left before you find out your "Freedom Point."
You have just ONE DAY LEFT to sign up for the very special Making Money University Tele-Seminar, "5 Steps to Your Freedom Point." The best part of this seminar is that it is absolutely FREE.
I am conducting this FREE tele-seminar with my mortgage expert and Certified Mortgage Planner, Josh Lewis, because I believe so strongly that every one of my Alert readers needs to hear this message.
Most Americans have two significant assets in their lives, the equity in their homes and the money in their retirement accounts. For most people these accounts go totally unmanaged. This is a serious mistake that could cost you tens of thousands, even hundreds of thousands, of dollars during your lifetime. I don't need to tell you that a mistake could be the difference between a retirement of struggling to make ends meet or living out your golden years in comfort, in style and in freedom from financial worry.
This special presentation event is scheduled for Thursday, Nov. 16, at 6:30 p.m. PST (9:30 p.m. EST). On this call, we will outline a unique 5-Step process for integrating your mortgage with your financial plan. This process offers significant wealth building benefits, many of which you won't find from your average Wall Street financial advisor.
Attendees will come away with the following invaluable knowledge:
- Learn the 3 major "risk" factors in your current loan and how to insure you aren't overexposed with your current financing.
- How to get Uncle Sam's help to fund your retirement
- Why "Cash is King" and how to end credit dependence by becoming a cash consumer
- The right way to leverage your home to fund your retirement and build significant liquid assets
- What an "offset account" is and the best options for investing your offset account funds
- How to reach your "Freedom Point" -- the point at which you have enough assets to pay your mortgage off in as little as 7-10 years
It's going to be a great event and I look forward to having you join us. Click here to register now. Once you have signed up, you will receive an e-mail with instructions for calling in and accessing the online content.
Don't worry if you won't have access to a computer at the scheduled seminar time. The audio portion of the call will give you everything you need and we will follow up via e-mail with all of the online content.
Don't wait, since lines for this call are limited. We already have added additional lines to handle the volume of calls but we won't be able to do so again.
I really don't want you to miss this important information, so sign up for this FREE tele-seminar right now.
"5 Steps to Your Freedom Point"
Thursday, November 16, 6:30 P.M. - 7:30 P.M. PST, 9:30 – 10:30 P.M. EST
Click here for your FREE tele-seminar registration.
DOUG GOES YOUTUBE 6
The technological advances just never cease! You now can catch a video stream of my live market updates. Just click here. This outreach effort is just another way for us to interact with you. Sign up at the web site to comment on my videos, send me a message, and get updates when we post new episodes. I broadcast a market update Monday through Saturday, which is uploaded by 5 p.m. PST. If you want to check out past shows, go to our video archive. Don't forget, you also can listen to the show through our podcast and live streaming whenever it's convenient for you. It's all at the site. It is just another way that we are helping you to stay on top of your money.
WINSTON'S WISDOM
"Americans will always do the right thing, after they have exhausted all the alternatives."
- Winston Churchill
It's always good to keep in mind this bit of Churchill-ian wisdom, especially in the wake of the new political landscape. Some of you may like the new Congress and some may fear its new agenda. But whatever happens during these next two years, I'm betting the American people will do the right thing.
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.