Stocks

There’s nothing fixed or secured about stocks. There’s no longer a connection between a company’s profit and its stock performance. And which companies consistently earn a profit anyway? Further, most public companies are far less forthcoming with financial and company information than they should be to investors, especially about future earnings potential. And even if they are in a good industry, we need to question management’s capability and agenda. Generally, most senior executives and CEO's are so incentivized by short-term objectives that they refuse to look at the more significant, long-term improvements that could be made. Lastly, is there an economist on the planet who thinks the US or global stock markets will rise in the next couple of years? Answer: no.

The smart money says…

you can’t afford to throw your money into gigantic, mismanaged, inflexible corporations that are coming under increasing government regulation. You have no control or visibility to what is happening with your money. You get all the risk with absolutely no guarantee of a reward.

Bonds

Both corporate and government bonds pay a fixed income just like we do. But not nearly as much. And unless they are government bonds you get no security or insurance on your investment whatsoever. And the value of the bond goes down as interest rates go up. Considering interest rates are currently at historic lows, bond prices have a lot further to go down than up.

The smart money says…

the minimal fixed income of a bond has some appeal but the risk of loss of principal due to price fluctuations is much too high.

CD’s and Money Markets

Well, we’re getting warmer. At least these qualify as fixed and secured (FDIC insured up to $100,000). But that’s where the similarities end. As of today, your reward for investing in a 3-year CD is a whopping 2.5% and a money market account about 2.5%.

The smart money says…

the income from conventional fixed, secured investments is too low. In fact, it is lower currently than inflation which means prices are increasing faster than the value of your CD—a high price to pay for security of principal.