On May 6, 2010, in just under two hours of activity, $1 trillion in value was lost, before about 97 percent of it was recovered. Never in the history of the stock market have we experienced this large of a loss this fast. In just 15 minutes, 698 points were lost of the total Dow decline of 998.5.
Accenture dropped from $42.17 per share to one cent before recovering. Proctor and Gamble fell 37 percent, and 3M fell 25 percent in the blink of an eye.
Have you ever had your broker say, "Don't worry, I'll keep an eye on things, and if there's a problem, I'll call you." We now live in a world of technology that makes that statement obsolete. It would have taken longer to dial the phone and wait for an answer than it did for Accenture to be wiped out.
The stock market is much like Las Vegas, and on any given day or at any moment is capable of tremendous damage. People have gotten away from the fundamentals of buying good companies and instead, are buying the market through mutual funds that often have so many holdings that the owners have no idea what companies they are in. If they do happen to know this month, within a few months it all changes in the volatile crap shoot the market has become.
The market is attractive because people want instant gratification. They want wealth now instead of getting rich slowly, systematically, and with some sort of certainty. Their attitude is: "I want my home, car and vacation now; and if I can't afford it, I'll just borrow."
For the number of people who make big money in the market quickly, there are thousands more who lose their shirts trying. For me, the market represents a place of opportunity and tremendous risk. To mitigate the risk and keep the market's opportunities intact, I participate through a financial product that is so very appropriate for the times in which we live.
The fixed indexed annuity is power and peace of mind in one strategy. Why do we need protection from the market? Because the market keeps making history in ways no one prior thought possible, and the history its making is not good.
Why did the market fall almost 1,000 points in a few hours? There are many conjectures of trades made in error -- the machines took over, Citibank made a huge error, the Exchanges messed up. However, none of these explanations have proven true. It appears the cause of this temporary $1 trillion loss was once again the news! Greece is a picture of what may be coming in America if we don't mend our ways. Our spending is out of control; and eventually, like Greece and Iceland, we will pay the price. Just the thought of what this would mean for America sent the market tumbling.
I work hard for my money; and if I end up in retirement with millions, it will not be because I risked my life's work in the market and got lucky. No, it will be because I protected my life's work, while participating in the market with some of that labor represented in my investments.
I have never lost any money in any of the many FIAs owned by my family members and I. We have made gains as high as 22 percent, and still have these gains in our accounts. All the gains we have made, whether they were 3 percent or 22 percent or somewhere in between, were made on all the money in the accounts since when you can't lose, you never have to waste time recovering. I would rather have a 7 percent gain than a 20 percent recovery any day. And, yes, over time, my safe and powerful Turtle will win the race, while taking no market risk.
What is it that people want that is not fulfilled inside an FIA? People tell me they can't afford to lose anything, they need returns to fight inflation and provide for a secure income one day. They want to be in control, and they want liquidity.
- Do mutual funds offer all these features? No.
- Do stocks? No. In 1999 the Dow Jones was at 10,000 points. In 2009, it was at 10,000 points; and I believe in 2019 it will be at 10,000 points. What will keep it there? Two things: our country's massive debt that by then will have grown from $12 trillion to $20 trillion, and the fact that 77 million baby boomers will no longer be in their prime spending years, which is what had driven the stock market and real estate markets to bubbles that have both burst. Get used to life after 2007, because we are now living in a new normal. Market and real estate values will not return to those levels for a long time. In 1990, Japan's Nikkei was at 37,000 points. Today, 20 years later, it's at 10,000 points, a drop of 75 percent. Real estate in Japan today is still off 63 percent from its 1990 highs. Why? The population is aging and spending less. 70 percent of our nation's GDP is driven from consumer purchases. We are deleveraging, paying down debt due to fear, and not spending at the rate we once were.
- Do bank CDs? No. Currently the national average for a one-year CD is .71 percent and a five-year is 2.13 percent.
- Do bonds? No.
- How about real estate? Bill Gross, CEO of PIMCO Bond Funds says that he believes homes will soon be viewed as a place to live and not as investments.
The old saying that to make a good return you have to risk your money is no longer true. I make great returns without risk inside my FIAs, and so do thousands of my clients. I know they love their annuities because they tell me so. It is very gratifying to hear from my clients that when they hear on the news about a market dip, it's just information to them instead of a personal financial crisis and they are glad all over again they have an FIA.
Buy an FIA for yourself then sell them to your clients and you will find a life of happiness that you may have thought was unattainable in the volatile world in which we live.
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