Should You Invest in Stocks ? Every Cycle Reaches a Point where Investors Shy Away From Stocks

By: Larry Cyna | Sun, Jul 22, 2012
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Investors Are Being Advised to Invest in Bonds or Dividends

It is interesting how history repeats itself, yet few seem to understand this. Our economic world revolves in cycles, and each cycle is remarkably similar to the ones before and to the cycles that will be experienced in the future. As we near the bottom of this current cycle, the stock market has fallen to lows, investors are beaten up, and faith in the long term benefits of the stock market has mostly disappeared.

This is coupled with financial scandals where Wall Street executives, and the barons of industry are exposed for money hungry uncaring, greedy and unconscionable people. Portfolios have been severely hurt, and negativity abounds. Bad news stories abound in the newspapers about further stresses to come, and worry and concern are in large supply.

The newspaper USA Today just published a comparison of the drought in 1933 to today's drought. The article brings back images of the "dust bowl" of the Great Depression. Another article promotes fear of the stock market.

Headline in USA Today Last Month

The print edition had a center column, above the fold, screaming green headline "Invest in stocks? FORGET ABOUT IT." .... The story read "On Main Street these days, investing in the stock market is about as popular as watching a scary movie on a 12-inch black-and-white TV.

Fear and uncertainty is pervasive. Whether you apply identical descriptions to the many economic cycles before, or the current phase of the cycle that we are now in, the description fits very well.

Wall Street's long-running story about how stocks are the best way to build wealth seems tired, dated and less believable to many individual investors. Playing the market isn't as sexy as it used to be. Since the 2008-09 financial crisis, the buy-now mentality has been replaced by a get-me-out, wait-and-see, bonds-are-safer line of thinking.

Understanding the Future

There seems to be remarkable similarities in every economic cycle. Investors rush into the stock market. More and more people talk about the stock market. Investment newsletters grow in number, TV shows and commentators devoted to the markets increase in number. Then, the inevitable downturn comes. The current inevitable downturn is more pronounced than most because of the massive amounts of money and debt created by Allan Greenspan, the previous chairman of the Fed, yet the downturn would have come regardless. It is just worse because of Mr Greenspan.

As the downturn proceeds, bad news pervades everywhere as the media reports devote themselves to the current mass interests, which interests border on fear. The mood of downturn becomes more pervasive, investors flee investments in search of safety. It almost seems as if there is a preordained order of things whereby until investors give up hope, the cycle will not end.

Every Cycle Ends in the Beginning of a New Cycle

In this ever increasing realm of fear and uncertainty, we have to remember that the ending of each cycle is also the beginning of the next cycle. It is true that we have unsustainable debt, that Europe is in crisis, that the US housing and job reports are dismal, that China is slowing, and all of the rest.

It is also true that as the current cycle grinds to an end, that the new cycle is beginning, as it always does. Technology and communications are advancing at an unprecedented rate. Our world is changing faster than it ever has before. Millions of new consumers demanding goods and services are being created. As the baby boomer age draws to a close, new generations are maturing and becoming consumers and innovators. There are more ships than ever before, more telephones than ever before, more consumers than ever before, faster dissemination of information than ever before, and so on.

Timing Entry into the Stock Market

There have been many studies and reports on long term investing in the stock market. Generally they say that an investor can expect 3% to 6% return annualized, but the true returns, in reality, depend on the inflation factor, and more importantly, on the timing of the investment. If investors had great patience, did not buy and hold through all cycles, did not buy when the media was excited about the stock market, but instead bought only when everyone else was cowering in fear and ignoring the stock market, and sold after the cycle hit its zenith, the Return on Investment would have been stellar.

The conclusion is that now is the time to consider investing. Perhaps the market will fall some more. Perhaps not. Perhaps the Euro will be abandoned. Perhaps not. Perhaps China will start having bumps in its road. Perhaps not. One thing is for sure. Whether it be because of a change in the price of energy, or a new technology, or a new way of doing business, or because of something else, the next cycle will start shortly. Stay tuned.



Larry Cyna

Author: Larry Cyna

Lawrence J. Cyna, CA

Larry Cyna

Larry Cyna, CA, is CEO and Portfolio Advisor to Cymorfund, a boutique hedge fund. He expresses his insights several times a week on his blog and offers a free newsletter which can be subscribed to here.

Mr. Cyna is an accomplished investor in the Canadian public markets for over 20 years, and has managed significant portfolios. He is a financing specialist for private and public companies, and has expertise in real estate and debt obligations. He has assisted private companies accessing the public markets, has been a founding director of public companies and is a strategic consultant to selected clientele.

He is and has been a director, a senior officer and on the Advisory Board of a number of TSX and TSXV public companies in the mining, resource, technology and telecommunications sectors, and the Founding Director of two CPC's with qualifying transactions in mining and minerals. He was an honorary director of the Rotman School of Management MBA IMC program, has completed the Canadian Securities Institute Canadian Securities Course & Institute Conduct and Practices Handbook Course, was a former Manager under contract to an Investment Manager at BMO Nesbitt Burns, a roster mediator under the Ontario Mandatory Mediation Program, Toronto, a member of the Institute of Corporate Directors of Ontario, a member of the Upper Canada Dispute Resolution Group, and the Ontario Bar Association, Alternate Dispute Resolution section.

He obtained his designation as a Chartered Accountant in Ontario in 1971 and was the recipient of the Founder's Prize for academic achievement together with a cash reward. He became a CPA in the State of Illinois, USA in 1999 under IQEX with a grade of 92%. He is a Member of the Institute of Chartered Accountants of Ontario and the Canadian Institute of Chartered Accountants.

He holds certificates in Advanced ADR & in Civil Justice in Ontario, Faculty of Law, University of Windsor, certificate in Dispute Resolution from the Ontario Institute of Chartered Accountants. Previous accomplishments are Manager of Cymor Risk Consultants LP specializing in Risk Management Assessment; CEO of Cyna & Associates specializing in mediation and ADR; Founder & Senior Partner of Cyna & Co, Chartered Accountants, a fully licensed and accredited public accountancy firm with international affiliations; and was a partner in a large public accountancy firm.

Mr. Cyna is well known in the Canadian Investing community. He attends presentations given by public companies to the industry on a daily basis.. These presentations are intended by the various hosting companies to present their inside story for the purpose of attracting funding, or of making parties more interested in acquiring shares of those companies. Being in constant communication in this manner keeps Mr. Cyna deeply involved in the current market and leads to numerous investment opportunities.

Mr. Cyna is currently a Director of Argentum Silver Corporation and Telehop Communications Inc.

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