The Wake Up Project

When was the last time you saw stocks decline 54% followed by a 55% rally? When was the last time you saw stocks (NYSEArca: VTI - News), bonds (NYSEArca: AGG) and commodities (NYSEArca: DBC - News) move in sync for nearly two years? When was the last time asset allocation did not really provide the diversification and protection it was supposed to? When was the last time, a ten year investment in the stock market delivered negative returns? Investors that care to harken back 80 years will find that the 1929 - 1932 era is the only period of time that compares to today. In fact, the parallels between now and then are bountiful and scary. But who cares about history when the market is up and the forecasts call for better days ahead. The Dow Jones (DJI: ^DJI) broke the 10,000 for the first time in over a year, the S&P 500 (SNP: ^GSPC) rallied over 55% and the Nasdaq (Nasdaq: ^IXIC) has soared nearly 70%. Wall Street is anxiously expecting another earnings season, which is expected to b...

Titanic Derivatives What are derivatives? Some investors describe them as “dormant economic weapons of mass destruction”. They essentially are large leveraged bets on top of stocks, bonds and commodities. Money can be made within months or seconds by betting if a stock will go up, down or even remain the same. With no credit rating you can place a bet worth double your account balance. Big time investors get greater leverage with these instantaneous loans. The New York Times, Oct 8th 2008: “The derivatives market is $531 trillion, up from $106 trillion in 2002″. This market is setup with odds similar to a racetrack. Trillions are won and lost (transferred) every second. But unlike a racetrack the big players have ultimate control. Their trillions can make stocks move. A 4% up swing in a stock can cause a derivative bet to rise more than 100% in value or vice versa. A low performing stock that rises only 6% a year could actually have many 3, 6 or 9 percent swings weekly or monthly (some...