Rules Based Investing

Fulfilling a Mission

When I came out of retirement, I wanted a mission statement that actually was real and identified who I was, and would roll off my tongue with honesty and authenticity. Being in business, involved in politics, and active in community organizations I came across numerous well-intentioned mission statements but none that I could ever remember or that resonated with me in full.

The mission statement for Preservation Capital is: "To educate and save hundreds if not thousands of families and individuals from the financial devastation that wiped out the middle class in the stock market crash of 1929."

Honestly, that mission statement was Divinely gifted as I had muddled around with half of a dozen others before this was given to me, and for that I am grateful.

So, as they say, "put your money where my mouth is" and so I shall. Starting with this blog I will be publishing a series of educational blogs, doing short videos, interviewing market experts, and putting on seminars. They will be available for anyone that wishes to learn how to protect themselves and their family from a financial tsunami that is but a mere summer storm at present but promises to get much worse. I say this not to promote fear but rather the opposite, to bring attention to the Facts - sometimes we don't want to hear the truth, or the truth isn't widely spread by the mainstream. So, I am not here to "offend" but rather I am here to "defend" you.

Part 1. Rules-Based Investing vs Modern Portfolio Theory (Buy and Hold, "Ride it Out")

What I am about to share is evidence; Fact Based Data that in some cases dates back 141 years and shows how extremely vulnerable the stock market is.

I encourage everyone that has any money in the markets to invest a few minutes of your time to objectively look at the data.

This is how I manage money, based on Facts, not the Theory that the vast majority of advisors do.

This is not a time to be complacent, to ride it out or God forbid, add money to the markets.

Most of you reading this will be invested in something called Modern Portfolio Theory which was spawned in 1952, on the heels of a 20-year bull market recovery from the most devastating stock market crash in history, by an academic named Harry Markowitz. This "Theory" purports that the best way to invest is to diversify with stocks, bonds and cash within your comfort zone for volatility and the sit back and snooze, also known as "Buy and Hold”. And as I point out, it is all based on a Theory. The definition of theory is, "an idea used to account for a situation or "justify a course of action."

My approach along with other outside-the-box thinkers/advisors would rather come to conclusions through Facts to "justify a course of action", rather than a theory.

Modern Portfolio Theory works well in an environment of low inflation, and falling interest rates with stable and growing economies in jurisdictions that are financially sound. None of that exists today, it is actually quite the opposite. It did exist for the past 42 years as rates dropped from 20% to 0.25% prior to the drunken printing of money and government spending spree that has occurred since 2008, which was done by the way simply to keep the stock market on life support. Put bluntly. it is foolish to use the same system under totally different circumstances. One doesn't drive the same speed or use the same slick high-performance tires on a double lane highway on a clear summer's day as they would in a mid-January snowstorm with an ice-covered road. This attitude would cause one to hit the ditch or worse yet, crash. The same attitude applies to the way you invest your money and right now we are in the eye of the storm, and you need different tires and a different attitude behind the wheel. Failure to adjust will cost investors dearly when the real storm hits.

A quick lesson on CAPE

I will leave you with this today, a quick lesson on a centuries-old indicator that has never lied in 141 years.

The long-term valuation of the market is commonly measured by the Cyclically Adjusted Price to Earnings Ratio, or “CAPE”

As such, history is not on the side for a positive return in the US stock market for the next 10 years.

Historical CAPE Values in the graph below show a current reading of 30.71.

Since 1881, the average annual return for stocks "for all ten-year periods" that began with a CAPE in this range has been NEGATIVE.

Everyone needs a plan to deal with what is to come. We have a plan, a plan based on history, not theory or speculation. A plan to protect and prosper.

We can help.

It's not too late to make changes and protect your wealth.

Have a great week. If you do not want to receive this information, please email me back and unsubscribe, I don't want to be considered spam and I won't be offended.

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Call us anytime for a free 30-minute consultation.

And invest some time to listen to Mike Maloney’s 10-part video series called “The Hidden Secrets of Money.” You will learn a lot about history and how history keeps repeating itself. https://www.youtube.com/watch?v=DyV0OfU3-FU

Yours in Faith, Family, and Finance,

Daryl Cooper