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Statement of Shock Is on the Way

March 28, 2022

It is in the middle of March, and with a few weeks left to go in the quarter, we could see further declines. In the first week of April, investors will be receiving their March statements, and depending upon the brokerage firm, they may also see year-to-date numbers. The overall returns for the quarter, assuming there is no significant rally or further corrections, looks like this: 

Dow Jones industrial average year-to-date-off -9.7% 

The S&P 500 year-to-date off -11.6%

The NASDAQ year-to-date off -18.0% 

To achieve these losses, an investor would have to have had all of their money 100% invested in the index. It is possible but not likely. Keep in mind if you are picking individual stocks your results could be dramatically different. 

The Bitcoin was off almost -18.16% year to date. Next, let's look at the action of gold and oil. Gold is up +9.6%, and West Texas crude oil is up +42%. Last but not least, are interest rates. The 90-day T-Bill was the best place to be. On a year-to-date basis, the yield on the 90-day bill is up 692%.   

Reuters news service made this startling claim on April 9, 2021, "More money poured into stocks in past 5 months than over last 12 years." Based on clients' asset allocations, Bank of America (BofA) said, "A record 63.6% of the money was invested in stocks, 18.5% in debt, and 11.6% in cash. Ten months later, that commitment to stocks is down 4%, with all of the decline coming in the first 7 weeks of the new year. 

If the decline stabilizes over the next few weeks, the investor's account statement coming in the first week of April will be shocking in the magnitude of the declines in their account values. The investor will look for somebody to blame for the decline, and initially, it will not be themselves. They may never blame themselves. The first person who should get the blame is President Biden and all of the changes he made with executive orders.  

His administration has made many judgment mistakes, but the two most significant are oil and mandates. On his first day in office, he made a substantial change in the energy policy in the United States and did so without any viable alternatives. Most Americans don't realize the impact oil and natural gas have on the American economy. On the day Joe Biden took office, the price of West Texas Crude (WTC) was $55.50 a barrel. Now 13 months later, it broke $120 a barrel, and I think I will set a new all-time high before the mid-terms.  

The price for gasoline at the pump is the most visible example of inflation in every American's eyes. Most Americans have no clue about the thousands of products that come from crude oil and natural gas.  

The second critical issue was the COVID 19 mandates and the lack of order from the government in what to do, when, and where to do it. Biden made promises concerning the vaccine and masks, and he let the medical people from the CDC and power-hungry governors and mayors who wanted to dictate our lives, run the country. 

The run to an all-time high in the stock markets kept the portfolios intact. We had a significant decline in the early stages of the pandemic, the market recovered quickly, and so did our investment accounts. Now investors are less interested in all the companies that made them a lot of money as they start to see it slip away. The markets were the anchor for the economy and the American people.  

We are quickly headed to a crisis of confidence by investors. I have been managing money for over half a century, and there reaches a time in a market cycle when people pay no attention to it and believe they are the best stock picker ever. When the markets turn, they panic because they don't know what to do. All the ideas that worked in the past are no longer working.  As an example, Amazon went from $3,731 in early July 2021 to $2,710 in early March 2022, down over $1,000 per share - a decline of over 27%. 

The panic of losing everything leads to selling out, which is most likely at the bottom. The one thing that worked and saved investors' sanity is now gone like Amazon. Here is a simple tip that has always worked for me in advising my clients. When we have a sharp decline like we are seeing, make the time to take an honest look at each company and do the best to decide if it has to power to come back or not. If you conclude that you don't think it can recover, before you decide to sell, contact your broker and see his firm's research information on the stock.  

Pick your sells and a price at which you would be willing to sell. Use a limit order for your price and tell the broker you want to leave it a “Good Till Cancel” order. The next step is to remember that it is very difficult to pick individual stocks. Going forward, look at low-cost index Exchange Traded Funds (ETF) for your next investment. This volatility will pass. Make sure that you start a shopping list on ETFs you are interested in buying and be ready to buy.

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Dan Perkins is the author of 9 books, a nationally syndicated talk show host, an expert on energy, the founder of the Black and White radio and TV network promoting free speech, and the host of two shows on the network, Blacks and Whites and Dan After Dark. His newest outlet for commentary is https://yournews.com/33908. You can find more info about Dan and his works at danperkins.guru.
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