1/25/2015 – A negative day with the Dow Jones down 209 points (-1.30%) and the Nasdaq down 73 points (-1.58%)
At least according to mainstream media and numerous financial pundits. Case and point…..
“The global financial crisis created such a high level of risk aversion that people didn’t just wait for the start of the rebound. In some cases, they waited for years,” said Kristina Hooper, U.S. investment strategist at Allianz Global Investors. “I can’t tell you how many investors I came across in 2011, 2012 and even 2013 who had missed out on a lot of the comeback in the stock market and were still sitting in cash.”
Fair enough, but there is another side to the story. Cash has been one of the best performing assets since 2000 top. Let’s run a simple calculation. In January of 2000 (major top on the Dow), both the 10-Year Note and the 30-Year Bond were yielding around 6%. Flat yield curve at the time – forecasting recession.
Now, lets take $100,000 and compound it at 6% for 15 years. I get $239,655 or a return of roughly 140% (not considering taxes here). Most importantly, don’t forget, the return above is essentially risk free.
And what did the stock market do during this time? Boy am I glad you have asked.
- Nasdaq: -10% from 2000 top.
- Dow: Up 35% since January 18th, 2000 top (About 2% annualized return)
- S&P: Up 28% since 2000 top. (About 1.7% annualized gain).
But I am not done yet. Feast your eyes on this S&P inflation adjusted chart.
Yes, as of May 2015 top, inflation adjusted S&P has returned nothing. Zilch, nada, zero. Same story with the Dow. Nasdaq is still down 30% – inflation adjusted that is.
But I am not done yet. I continue to maintain that today’s market is selling at incredible valuations levels and about to correct in a major way. When it hits bottom again, I fathom that the cash above will outperform the market by a factor of 10x. Inflation adjusted or not.
In other words, while your stock market return will be negative since 2000 top, you could have at least doubled your money in a risk free fashion if you held US Treasury Bonds/Notes during the same time. I understand the yields above are no longer available, but we have compare apples to apples here. Meaning, the same initiation date of January 2000.
So, the next time financial advisers tell you that it’s a fools game to hold cash, pushing you towards the always “undervalued” stock market, show them the chart above and tell them to go pound sand.
This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.
(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update.January 25th 2016 InvestWithAlex.com
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