Jim Cramer Is Seeing Red

The markets are too efficient to allow accurate predictions. The markets are random and unpredictable and yet shows like Cramer’s continue to make predictions. These bullies only goal is to increase viewership and advertising dollars. Don’t empower the Wall Street bullies build a prudent portfolio and remain disciplined. To help with this you should fire your broker and hire an investor coach.

English: Lehman Brothers headquarters in New Y...
English: Lehman Brothers headquarters in New York City (Photo credit: Wikipedia)

Cramer’s advice to buy Chinese stocks now before his insight about driving global growth is “all priced in” is particularly foolish and misleading. Information about the prospects for China (and all other countries) is well known by the millions of investors in the global marketplace. It has already been widely reported in the financial press. The current price of stocks in China and elsewhere incorporates all of this information. As such, Chinese stocks are priced fairly today. They may go up or down in the future, but it’s tomorrow’s news that will drive those prices, and not information that’s already in the public domain.If Chinese stocks end 2013 with a significant increase, Cramer will tout his stock picking expertise. If they don’t, he will move on to the next prediction. There’s no accountability for bad calls. Eric Tyson, a best-selling personal finance author, wrote an excellent blog post on the perils of following Cramer’s advice. He noted Cramer’s advice on financial stocks (where you might think he has special expertise) has been terribly wrong. Most notable was his recommendation to buy Lehman Brothers on Sept. 5, 2008. The stock was trading at $16 a share. Cramer called it “a screaming buy” and opined that things couldn’t deteriorate further. After bankruptcy, Lehman sold for pennies per share.

The Wall Street bullies like Jim Cramer, know that the viewing public have very short memories. They will continue to make predictions right or wron it does not matter.

Please comment or call to discuss how this affects you and your investments.

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You May Be Suffering From ‘Abused Investor’ Syndrome

Project portfolio management
Project portfolio management (Photo credit: Wikipedia)

No one in the financial instituions wants investors to realize that they CANNOT stock pick or market time with any consistency. NO ONE CAN. Investors would be better served with a prudent portfolio and the discipline to stay the course.

Most members of the securities industry are not criminals — at least not the kind defined in the penal code. They are far more dangerous. They claim to have “expertise” in stock picking, market timing, manager picking or the ability to put you in investments with big returns and modest risk. Most investors believe them.Sound familiar? If so, you can learn a lot from the literature on battered woman syndrome. Studies show the longer the women stay in the relationship, the more likely they are to be seriously injured.

The lesson for investors is clear. Your “market beating” broker or advisor can’t hurt you if you end the relationship.

Any stockbroker, adviser, insurance agent who claims they can ‘beat’ the market is selling performance not a prudent investment strategy. They offer anecdotal evidence of past successes. These results are a matter of luck and NOT skill and do not repeat.

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Some 401(k) Plans Let You Take the Wheel—If You Dare

English: The model shows institutions and mark...
English: The model shows institutions and market as a possible form of organization to coordinate economic transactions. When the external transaction costs are higher than the internal transaction costs, the company will grow. If the internal transaction costs are higher than the external transaction costs the company will be downsized by outsourcing, for example. Deutsch: Die Darstellung zeigt ausgehend von der Transaktionskostentheorie die Begründung für die Existenz von Unternehmen. (Photo credit: Wikipedia)

When plan sponsors offer a brokerage window in their 401(k) plan they must monitor how it is invested. Remember, as a fiduciary you are responsibile for the plan participant AND their beneficiaries. Most who choose the brokerage window believe they can beat the market. This is futile.

Other things include minimizing transaction costs by buying no-load funds and ETFs, which generally have lower expense ratios than mutual funds. And minimize trading. Numerous studies document the tendency of people to exaggerate their own investing competence, and to overtrade as a result. (Men tend to trade more than women, and to suffer more as a consequence). A broker would invite trouble for “churning” your account—that is, trading excessively to rack up commissions. Most people tend to be their own worst broker.”It’s human nature that they have a lot of emotional overlay,” says Kasten, “so they will tend to be buying at market tops and selling at market bottoms.”

Individual investors are ill prepared to manage their own investments. Most allow their emotions to guide their investments decisions with very poor results. Many are trying to substitute a disciplined savings approach with stock picking. In the long term most will lose.

Please comment or call to discuss how this affects you and your company 401(k) plan.

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