By: Todd Wheatley
(c) IQ-2k   01-02-14

My wife was laid off from the Bank of America mortgage foreclosure division just before the Summer of 2013. And as troubling as it was she found comparable employment two months later. The change, however, required her to attend to the disposition of her IRA and 401k accounts. No big surprise since this happens for everyone with any change in jobs. Her story may be typical for many who do not track the U.S. economy and remain active with their investment.

Some time later I found that she simply parked the money in cash and forgot about it. Again, for someone not active with investment it was not surprising. Beyond that 2013 handed us a number of troubles that were much more pressing. It was only after the troubles smoothed out that I asked about her retirement accounts given that the stock market was on a crazy run ... Arrgh!

When she told me I was instantly reminded of gambling misadventure some time back ... a crap game in the lovely town of Lake Tahoe where I missed cashing in on a great run. Actually two great runs by players who threw the dice much too wild for my taste. Instead I elected to sit on the side and wait them out. Big Mistake! Many others did exceptionally well with those runs and then the table went cold. I guess the lesson there was not to be too quick to judge. Nevertheless that was a memorable trip. Even more so since I haven't gambled much since the Great Recession.

Some say that my risk tolerance is too low for me to be a good gambler. Then again those same people have lost way more money than I have gambling. And that is the essence of gambling ... losing money. Over the long haul you WILL LOSE. Lucky streaks do not last and there is no way to overcome the odds. The sad truth is that most investment counselors will quibble with semantics and tell you that gambling and investing are not the same. Don't be fooled the stock market is no different! There are winners and there are losers. It's just that the odds are reversed ... the steady "players" are favored in the long run. But with a volatile employment landscape how can anyone afford to be steady in the market?

My wife lost her steadiness and missed 18% of upside in 2013, but the real question is ... now that she is out, when does she get back in? Taking a tip from the crap table - don't rush in! At least look and see if several people are smiling. A hot table will produce more smiles than a cold one. Anyway given that the stock market has a long-term average annual upside of about 7% one could argue the market is set to fall since 2013 saw a 28% gain. At the very least a "correction" is in order. In fact yesterday, the first trading day of 2014, the market (DJIA) lost 135 points.

Does that spell trouble for the year? Hardly. Although many analysts have noted that "as the month of January goes, so goes the rest of the year". But then again you may remember January 2000 ... the upside went to March and then the Tech Wreck. Thirteen years later the NASDAQ has yet to recover to its pre-crash high. However with the Fed still buying up bonds and the shrinking gold market there are few options. More upside will persist ... for a while.


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