The so-called Wall Street “experts” have been telling investors recently that worldwide economic conditions will continue to improve and that stock prices will continue to trend higher during the months ahead.
Many of you probably recall that those same “experts” made similar claims in the weeks leading up to Oct. 9, 2007 — shortly before stock prices peaked and then fell precipitously over the next 17 months.
In contrast, I repeatedly warned investors during late 2007 that worldwide economic conditions would deteriorate substantially and that stock prices would fall sharply during the ensuing months.
For example, I told investors on Oct. 2, 2007 that the housing slump and subprime mortgage debacle was far from over; that economic activity in the manufacturing sector was slowing; and that consumer spending would likely decline significantly during the ensuing months.
I therefore advised subscribers to my investment advisory service, The ETF Strategist, to avoid stocks during that time and throughout most of 2008. I told them instead to invest in ETFS that appreciate in value when stock prices in general in decline.
By the time the majority of the same Wall Street “experts” had turned bearish and was telling people to avoid stocks in early 2009, I was telling investors to get back into stocks and equity ETFs.
For example, only 14 trading days before the major stock market indices bottomed on March 9, 2009, in an article entitled “Buy Stocks Now While They’re Down,” I wrote that my investment models indicated that equity prices would trend substantially higher during the second half of 2009.
I therefore advised subscribers to The ETF Strategist to allocate 100 percent of their capital at that time to equity ETFs.
Only two days after the major stock market indices bottomed during March 2009, I told investors in an article that dated March 11 that stocks and equity ETFs were trading at ridiculously low prices in terms of their future earnings capacity and that stocks were headed higher during the ensuing months.
One of the ETFs that I encouraged investors to consider buying at that time, iShares FTSE/Xinhua China 25 Index (FXI), appreciated 76 percent between that day (March 11, 2009) and the day that I told my subscribers to sell it, Oct. 27, 2009.
Now my models indicate that stocks will soon peak and then, within the next few months, pull back sharply.
Those who listened to my advice in the past have done well for themselves. I hope that you at least think twice before following the advice of the Wall Street cheerleaders.
About the Author: David Frazier
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