Bad Times, Great Markets

BAD TIMES, GREAT MARKETS How To Get, Keep, And Grow Money In The New Bull Market By Robert M. Barnes Copyright pending to Robert M. Barnes 2011 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the author. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the author is not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Other Books By Robert M. Barnes 1. Trading Systems Analysis, McGraw Hill, New York, 1997 2. Trading In Choppy Markets, Richard D. Irwin, New York, 1997 3. High Impact Day Trading, Richard D. Irwin, New York, 1996 4. Cutting Edge Futures Trading Methods For The 21st Century, Windsor Books, Brightwaters, N.Y. 1996 5. Megaprofit Commodity Methods, Windsor Books, Brightwaters, N.Y. 1983 6. Commodity Portfolio Performance Handbook, Van Nostrand Reinhold, New York, 1982 7. Making High Profits In Uncertain Times: Successful Investing In Inflation and Depression, Van Nostrand Reinhold, New York, 1982 8. 1982 Technical Commodity Yearbook, Van Nostrand Reinhold, New York, 1982 9. Commodity Profits Through Trend Trading, John Wiley & Sons, New York, 1982 10. 1981 Technical Commodity Yearbook, Van Nostrand Reinhold, New York, 1981 11. Taming The Pits, John Wiley & Sons, New York, 1979 12. The Dow Theory Can Make You Rich, Arlington House, New Rochelle, N.Y. 1973 CONTENTS Charts and Tables p. 6 Introduction p. 7 Chapter One: The Mess We’re In p. 9 Chapter Two: The History Of The Dow And What It Portends p. 25 Chapter Three: The Long Road Ahead p. 41 Chapter Four: Workers: Getting and Growing Money Viable Stocks And Four Portfolios p. 53 Chapter Five: Near Retirees: Keeping and Growing Money p.104 Chapter Six: Retirees: Keeping Money p.110 References p.124 Index p.125 CHARTS AND TABLES Chart 1 The CAC40 Index p. 19 (1984-2009) Chart 2 The DAX Index p. 20 (1991-2009) Chart 3 The FTSE Index p. 21 (1984-2009) Chart 4 The Hang Seng Index p. 22 ((1989-2009) Chart 5 Japan Nikkei 225 Index p. 23 (1984-2009) Chart 6 The Dow Jones Industrial Average(Linear) p. 29 (1928-2009 Feb.) Chart 7 The Dow Jones Industrial Average(Logarithmic) p. 30 (1928-2009 Feb.) Table 1 Dow Jones Industrial Averages Peaks/Troughs p. 34 Table 2 Stock High Earnings Increases (S & P 500) p. 62 (1997-2007) Table 3 The Growth Portfolio p. 94 Table 4 The Value Portfolio p. 97 Table 5 The Conservative Portfolio p. 99 Table 6 The New Era Portfolio p.102 Introduction I woke up the other morning in a cold sweat from a real nightmare: I was topsy, turvy and tumbling about in space looking at a financial horror show on CNBC, something about some bemused guy admitting to bilking investors out of $50 billion in a giant Ponzi scheme. When I opened my eyes I did indeed see CNBC reporting on this very fantasy. That day, a couple of months before that, and the months (years?) ahead prove out to be even bigger disasters, for everyone, here in the U.S. and the rest of the world. An unbelievable set of economic events, swift and deep, had sent us into shock. The events were surreal: a steady stream of foreclosures was preceded and followed by convulsions in the financial markets, major bank failures and financial firm recombinations, the start of massive job layoffs, heavy infusions of public money ( it may reach well into the trillions of dollars), credit freezes, and huge closings of retail stores. That’s the short list. I had to quickly act in my own situation. I had stood aside last year in my own trading but still had my (long term?) IRA as of September, 2008. I had held on through other market slides, most notably the 2000 drop. The drop then was pretty severe( at one point down 50%), but there was an orderliness and seeming end to the fall. But this time I sensed something really wrong ( I am a quant by education, but can also feel once in a while real market vibes): everything was cascading, a systemic catastrophe. I got out of my IRA stock funds, and moved the money a couple of times to bigger firms tied to commercial banks, the three largest I could find, for safety. I even hauled back an annuity from AIG to my checking account bank, which proceeded to almost fail and merge with another bank of tottering stature. Frankly, I was nervous enough to question even the government’s ability to continue social security and Medicare! There was no place to park your funds and get either a good or truly safe return: even short term Treasuries paid no interest – you were entrusting the Treasury to hold your funds safely, just parking them there for free. After a swift blow to the head and wallet, and the shock wave that continues, we have to ask, What Happened? Then, What Caused This Mess? And finally, What Can We Do About It? Chapter One goes into considerable detail about the massive and many events and functional problems we are facing. Chapter Two reviews the markets’ history ( throughout the world) with a fine detail of previous situations, including 1929, and what they portend. Chapter Three reviews what happened after government and the investment system reacted, and a description of a new era that will come to pass. Chapters Four, Five and Six lay out job finding, cost cutting, money placement, and investing places and timing for three different needs/capabilities groups: working people( Chapter Four); near retirement workers(Chapter Five); and retirees(Chapter Six). In Chapter Four I create a table of worthy stocks (what) to invest in (122 of them) for all three groups once the market has recovered enough of its drop to produce a new bull market, which it has (when to enter the market). Four model portfolios with specific stocks ( Growth, Value, Conservative, and New Era) are discussed. I sincerely hope you survive and prosper in these hard but rewarding times. Robert Barnes Savannah, Georgia