Losing Faith In The “Systems”

Last week, we had some fairly large disruptions to the financial systems of America and the global economy.  With the major events of Europe surrounding the debt crisis of Greece, the ramifications were felt around the world (welcome to the global integrated economy).  The result was on Thursday a major drop in the stock markets including a one-thousand point drop in a matter of minutes on the Dow.  While the markets recovered slightly, this is hardly a sign of stability.

The event is an important one even as the media and financial “experts” downplay its significance.  The reality is that the markets are a house of cards.  In fact, the entire global economy is a house of cards.  We have seen hard evidence of this in recent years with the financial crash in 2008 and events like a 1,000 point Dow move just last week.  While these events are papered over with freshly printed currency and government bailouts, the structural issues remain underneath the surface.

As such, I’m losing faith in the “systems” that we rely on.  Specifically, I’m losing faith in the financial systems and even the stock market.  Meanwhile, Goldman Sachs announces that they did not have a single day of trading losses in the last 63 days.  Yes, 63 out of 63 profitable trading days last quarter.  Can you say, “rigged’?

If and when the system comes crashing down as many of us predict, an entire generation of Americans will be crushed.  Over the last 30+ years, Americans have become way too connected to the financial markets.  Wall St. and their partners in Washington D.C. have convinced a generation of Americans that the only way to have any sort of retirement or financial security is to be invested fully at all times in the U.S. stock market.  While Americans see their savings and funds go up and down with volatility, there is always a consistent winner: Wall St and their constant fees that are generated regardless of performance.

The dependence on the stock market is one of many dependencies that have been cemented over the recent decades.  Dependence on government, welfare, corporate America, pensions, stocks, etc. have together replaced self-reliance and self directed financial security.

If the system collapses under its own weight, the result will be ugly.  Not only will people’s savings be wiped out, but they will demand answers or demand someone’s head.  I’d hate to be a wealthy Wall St. exec at this point in time.

It’s important to take action now.  Don’t be fully invested in the stock market.  Have some of your wealth in real assets: precious metals, consumer products, other things that have real value.  I’m not saying you should abandon all paper assets, but understand the volatility (just look at last Thursday’s Dow chart).

In the meantime, if you want to stay invested in stocks to some extent, I’d say you can afford to be patient before you buy more stocks.  Wait for the next crash.  Then, deploy your funds into well-run, well-established companies that pay a nice dividend.  Think stocks like Philip Morris Int’l (PM), Wal-Mart (WMT), McDonalds (MCD).  Then continue to collect dividends, pool your cash, and wait for the next crash.  Rinse.  Repeat.

Good luck and don’t trust the markets to act like pure markets.  They are manipulated and corrupt.  Be extremely careful with any trading or investing you do, and make sure you do your own research before acting upon anything mentioned here.