The Investment Minefield

I'm having investment minefield flashbacks today, ten of them to be precise.

I remember heading into 2000 thinking that I'd be relatively okay. I felt strongly that the dotcom bubble was a bubble, but I was also mesmerized by the long-term performance of the stock market. One of my beliefs was that it was better to own banks than to have money in banks over the long-term. That brings me to financial landmine #1. I mostly avoided dotcom type stocks when most others seemed to love them. I wanted solid earnings. When dotcom stocks blew up, they did take part of my foot though.

As some may recall, I sold all my stocks in 2004.

It was August. I had done fairly well compared to the major market averages. I rode out the dotcom bubble's collapse and although it was painful I did manage to fully recover (and then some, but no better than CDs would have done overall). I looked through my stocks individually and I really didn't like what I saw. At the top of my not-liking list was Citigroup. Call this landmine #2. I had to replace a deep-rooted belief that it was better to own banks than have money in banks and replace it with a wacky theory that maybe neither option was a good idea. Not easy to do!

I had this very uneasy feeling that we were simply trying to borrow prosperity and I was therefore no longer interested in companies that specialized in debt. I still had some brainwashing left in me though. Buy and hold stocks for the long run, blah, blah, blah. I therefore sold all my individual stocks and bought broad market ETFs.

Shortly thereafter, I had an epiphany. If I didn't like my individual stocks any longer then why would I assume that a collection of all stocks would be any better? I wish I would have realized that on the first day, but fortunately I did eventually realize it. It cost me a few percent. The broad market was not doing well. However, in the grand scheme of things this was landmine #3. I managed not to step on it.

It was my plan then to wait for the next recession and then jump back in. One would come someday. I was mentally prepared to underperform the market into the distant future. It didn't matter to me. Greenspan and his crazy interest rate scheme had made me whole. That was good enough. I just didn't feel like taking the risk any longer.

Okay, so there I am sitting in cash. Sigh of relief. Right? Yeah, that lasted less than 24 hours, lol.

The very next day, I had another epiphany. Holy @#$%! I'm sitting entirely in cash earning next to zero interest, possibly even negative if inflation keeps up. That brings me to landmine #4. I put one third of my nest egg in gold and silver as the dollar fell and inflation picked up. Whew!

Fast forward to 2006. Gold and silver went parabolic. I sold. They promptly crashed. That was landmine #5.

Or was it? I was now sitting entirely in US Government debt. How did that happen? Further, avoiding landmine #5 was only good in the short-term. Nobody told me that gold and silver would form yet another parabola. Therefore, landmine #5 was actually a misplaced step to some degree. Boom! Literally!

Here comes a series of landmines. When I exited the stock market in 2004 it was my plan to jump back in when the next recession hit. However, the market gave me a lot of time to think and start a blog. I had way too much time in fact, to make charts that is. Whew!

When the DJIA fell to 11,000 in July of 2008 I was tempted to jump back in. Adjusted for inflation, it had been a rough four years. The market seemed fairly beaten up. That's landmine #6.

When the DJIA fell to 10,000 in October of 2008 I was tempted to jump back in. That's landmine #7.

When the DJIA fell to 9,000 in October 0f 2008 I was tempted to jump back in. That's landmine #8.

When the DJIA fell to 8,000 in November of 2008 I was tempted to jump back in. That's landmine #9.

Now the DJIA has fallen to nearly 7,000. I am tempted to jump back in. As you can see, I'm almost always tempted these days. That may or may not be landmine #10.

I'm not going to jump back in though. I'm reminded that more money was lost during the Great Depression attempting to bottom feed than was lost in the original crash. I'm never going to jump back in. That brings me to the latest epiphany. I'm done. I can stay in TIPS and I-Bonds for the rest of my life. If for some reason they do extremely poorly, then I strongly suspect that the stock market will be doing much, much worse. On the other hand, if the stock market does okay over the long-term then so will TIPS and I-Bonds. I therefore have very little reason to risk stepping on any more landmines. Further, I feel incredibly lucky as it is. That's a LOT of landmines. It really does feel like I'm standing in the middle of a financial minefield. I do not wish to tempt fate. I'm done moving!

I'm calling my condition Post Traumatic Landmine Disorder (PTLD). Let's hope you don't suffer from it. Let's really hope everyone doesn't end up suffering from it, or this economy will be in even more serious trouble.

You can lead a horse to water, but you better not do it through a minefield! It's a simple problem with the math. There's just too many darned feet.