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Funky Future


Let's talk about tomorrow's business for a moment. I don't mean tomorrow as in the day after today. I'm talking about tomorrow as in (cue weird organ music) the future. While we roll up our sleeves every day to focus on the twists and turns and each tick of the stock market, it's easy to lose sight of the larger picture. From a technical vantage point the big picture I see is that the stock market is still in the early stages of a structural bear market that could potentially last for many years.

Now that was an extraordinarily easy sentence to write. But it doesn't really say much about the future does it? There are always stocks to buy in a bear market and stocks to sell in a bull market. Some of you, especially those of you who have the flexibility to play both sides, may see little to be concerned about whether the market takes a longer-term bearish course, or a new bull reappears on the horizon. History, however, has shown us that structural bear markets don't end with a bang but with a whimper; a lonely, anonymous sigh. For those who intend to follow the stock market wherever she chooses to go, it might be worth considering what could happen if, as has happened in the past, interest in the stock market slowly fades away, volume declines, liquidity dries up and, in the worst case scenario, the market drifts aimlessly nowhere. While the most active traders among us would still likely be able to profit from that scenario, the average investor and position trader would probably find it maddening.

Meanwhile, back to my original point about the future, it's easy to forget that the stock market is not the only market in town. There are commodities futures to trade, foreign markets to explore, other asset classes to consider. The path of least resistance most traders and investors will take will be to remain in their comfort zone and follow U.S. equities, because that is what they are most familiar with. Going forward for the next 20 years, however, I believe it will be important to your financial success to expand your horizons to follow alternative investment vehicles such as gold, which in 2001 finally ended a structural bear market of its own, commodities, which have also shown signs of ending a long-term bear market, and other foreign markets that probably seem, well, foreign.

This will not be easy. The most rewarding things rarely are. In fact, I can probably come up with 20 or 30 solid, legitimate reasons why it will be difficult, if not practically impossible, for most investors and traders to cultivate a skill-set and a knowledge base that will allow them to take advantage of investment opportunities outside of the U.S. stock market. It is ironic, I think, that the average retail investor who will likely be most affected by a structural bear market in U.S. equities is the least equipped right now to deal with it. Again, this is not today's business, as Toddo says, but I think it will certainly be tomorrow's. To paraphrase George Clinton and Funkadelic, free your mind and your assets will follow.
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No positions in stocks mentioned.

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