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2016.01.10 Journal of Wealth & Success Vol 4 Issue 1.1

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4 wealth & success volume 4 issue 1 January 10, 2016 wealth & success Copyright 2016. All Rights Reserved. editor's desk It seems so long ago. The astronomical P/E ratios of late 2000 and the first quarter of 2001, when market "experts" told us we were in a new era, experiencing a paradigm shift, in which the aging baby- boomer population would keep earnings lofty for the coming generation. A 25-year bull market—what a concept! Fast forward to the last weekend of January, 2015. The major markets had just been walloped, falling 4% or so within one week. It looked as though we were off to a very ugly start to the year; and then February came, markets rose between 4 and 6%, and all was right with the world. Well, here we are again. The S&P just had its worst opening week of any year, falling nearly 6%. Do we have challenges on the horizon this year? You bet. The $19 trillion national debt will increase in size because politicians are afraid to take the action needed to reduce it, or even slow its growth. Agitators around the world, from Russia to North Korea to Iran, will likely step up their saber-rattling. And China...what a mess. We knew that they were selling the world a bill of goods with respect to their economic strength, but the myopic press drank down their government-pro- duced data like Kool-Aid on a sweltering August day. Oh yes, and it is also an election year. So, what should we do as the lemmings are jumping off the cliff? Detached experience tells us we should walk the other way. For all the talk of the efficient-market hypothesis (EMH), an investor would be wise to become as stoic as possible when assembling or analyzing an investment portfolio. Not only is it important to keep one's cool while everyone else is losing theirs, but these periods also tend to provide the richest soil for plant- ing new seedlings. Forget EMH—markets are not efficient, in the short run anyway, and wise investors can take advantage of that fact. The US economy is not heading back into recession, nor will America's markets be legitimately damaged if little Kim Jong-un did actually test a hydrogen weapon. China is slowing, but thanks to their one-way protectionism (our government didn't have the negotiating skills to reciprocate), American companies will weather the storm just fine. These events always cast a much bigger shadow on the ground, and the news-starved, frenetic press always focus on the specter, not the actual event. Case in point? How about the year-long frenzy leading up to the diminutive 25 basis point rate hike? Think of all the energy—in the form of hot air—wasted talking about this rather insignificant action by the Fed. Instead of joining the hoi polloi, make a vow in 2016 to be a free-thinker. Your portfolio will thank you. Michael S. Hazell editor in chief There is a persistent overall tendency for equity to flow from the many to the few. In the long run, the majority loses. The implication for the trader is that to win you have to act like the minority. If you bring normal human habits and tendencies to trading, you'll gravitate toward the majority and inevitably lose. —William Eckhardt, mathematician and renowned trader

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