The Low-Down on the Market and Getting Out of Debt

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So much about the stock market can put anyone with invested interests into a cold sweat.  Nearly every issue that effects the world can have the market headed into the basement.  Interest rates, whether rising or falling, wars, world hunger, earnings beats or misses, recession, expansion, just about everything has a butterfly effect on the market and often positive effects.

The latest issue investors are wary of is debt.

Market forecaster Bryon Wiens, from equity behemoth Blackstone, recently indicated the total U.S. government debt is currently some $20 trillion.

Its not just the government debt that has people leery, there’s margin debt. Customer account margin debts are at near record high levels. This suggests speculative excess indicative of overly bullish customers. At only 2.2% of the total market cap, it’s still below the 2007 excess levels, but reports of debt levels being “near all time highs” still sound more than a little frightening. This list of investing anxieties barely scratched the surface, each new fear compounds the next.

Critical debt levels are not the only topics of concern to fear-driven bears. 

In addition to debt levels, these questions are also plaguing the minds of worried investors: Will the U.S. Federal Reserve overreach, causing the economy to jam on the brakes?  As seen in the first the first quarter of 2018, will economic growth figures continue to miss economists’ expectations?

Will durable goods demand remain uncertain?  Will consumer sales continue at their five year most stagnant pace? And, in some markets, will home affordability reach unreasonable levels?

Fear keeps bears from investing in the stock market.

If these fears are keeping the bears up at night, it’s probably not the ideal time for them to be buying stocks or investing in research hours to search for opportunities in the stock market.  Bear ideology suggests there is just too much debt, too much uncertainty, too much can go wrong, the risk is just too great. Bears might opt to liquidate their stock holdings, take the money and buy gold, eat a big dinner then hibernate until the world picture looks brighter.

However, the bear would have been in a cave for five years, as these economic fears have in one capacity or another, been true since 2013. The 2016 presidential election and European debt problem were just a couple of other events that would have kept the bear laying low, yet, it’s not just the bears generating the fear driven market.

The bulls have used the media to generate the biggest market fear of all.

To some degree, everyone has it, a fear of missing out on the next big tip. Fear of missing out can be the most damaging emotion to drive an investor’s choices, leading to personal economic ruin. By chasing stocks at ridiculously high levels, a bull will almost certainly limit their gains, and leave themselves open to losses.

The media circulates market hype all day, every day, and on every platform.

Monday through Friday, headlines blare with new technologies, medical breakthroughs, miracle drugs, strong earnings growth, must have phones, cryptocurrencies, and on it goes. Some of it is true, some is not. But, the thing is, it’s coming at people wherever they are, and it’s meant to drive people into action. Bulls want a piece of that next big thing, they believe the “no end to the profit” hype. In many cases, bulls can be greedy.

There is the fear mentality and the greed mentality, surprisingly they are not very different in terms of an investor’s financial outcome. The fearful bears’ and greedy bulls’ emotions can cause both to earn much less than they potentially should in stocks, or sustain unmitigated losses.

The worst of things to happen to stock investors could be the Internet, and financial news outlets.

As previously mentioned, financial information is available 24 hours a day, 7 days a week, 365 days a year, and it never takes a breath. It is so easy for investors to become overwhelmed with the barrage of good news, bad news, here comes this awesome thing, so and so just filed bankruptcy, etc; they end up becoming paralyzed between fear and greed.

Investors should consider investing in small bank stocks trading below their takeover value.

Advantageous stock investments can be made by ignoring the blaring headlines and relying on the numbers. Investors need to seek out the lesser known, reasonably priced stocks to earn the high returns that lead them to their financial goals.

Unexciting small banks are not rolling out the next big tech, or curing Alzheimer’s disease and they are not usually in the media headlines. When small banks are taken over for 100% plus gains, things do get exciting, and stock holdings can be very profitable.

Undervalued real estate investment trusts are potentially profitable stocks to invest in.

A group of real estate investment trusts boast dividend yields far above their ten-year mark. Investments such as treasury bonds or junk bonds pay investors quarterly, while the value of the real estate catches up to the stock price.

There is high profit to be made in less exciting, out of the limelight companies, be they in construction, hardware, staffing, the list goes on. By tuning out the news headlines and financial hype, and investing with sound companies selling at ridiculously good prices, investors need not worry about the market direction.

 

 

 

 

 

 

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