Written By: Cathy DeWitt Dunn | President of Annuity Watch USA
The stock market has recently reached an all-time high and has many looking at their 401Ks and celebrating their exceptionally good fortune. However, I wouldn’t pop the corks on those champagne bottles just yet. There’s a chance that this bubble is about to burst.
The question is why is the stock market so high when so many other economic indicators are performing poorly or are in a downright tailspin?
Fox News reports that household income levels have dropped by a significant 8.2% in the last four years. Drudge reports that 8.5 million Americans left the labor force during that same time period while unemployment remains unacceptably high at 7.9%. It was suggested on Forbes that the real unemployment rate is somewhere in the neighborhood of 14.7%. USA Today reports on the anemic growth of the US GDP. Even Forbes asks the question, “Why is Wall Street winning right now and everyone else seems to be losing?”
With all the negative news, why does the stock market continue to rise? Chief investment strategist and CEO of Fearless Wealth, RC Peck says that the “federal Reserve stimulus and government borrowing to meet its obligations are driving stocks to record highs on a daily basis”, and I tend to agree.
In a recent interview with Money News, Peck went on to say, “It’s going up because this is yet another place that inflation is showing up. [The Fed is] not allowing recessions to happen. When we do correct … we’ll correct sharper and harder than we need to.”
In an article on Market Consensus titled, “Stock Market Correction is Imminent – Time to Take Profits (2013)“, it states, “Continual quantitative easing by the U.S. Federal Reserve has been a major factor contributing to the rise in asset prices.”
The author goes on to say:
“With earnings season not yet over, momentum may yet take the market on to new highs in the short term. But with most indicators pointing to over-valuation, this is not a good time for investors to enter the market. In fact, these levels offer a good chance to take some risk off the table and await the expected market downturn.”
A startling piece was posted yesterday (March 17, 2013) on MoneyNews.com titled “Billionaires Dumping Stocks, Economist Knows Why“. In this article, it is reported that billionaires Warren Buffett, John Paulson, and George Soros are dumping shares in U.S. companies at an alarming rate.
Buffett’s holding company, Berkshire Hathaway, reportedly sold roughly 19 million shares of Johnson & Johnson and its entire stake in computer giant, Intel. Paulson reportedly dumped 14 million shares of JPMorgan Chase and his entire position in Family dollar and Sara Lee. Soros sold almost all of his bank stocks of over a million shares in JPMorgan Chase, Citigroup, and Goldman Sachs.
The most startling statement in this article says, “It’s very likely that these professional investors are aware of specific research that points toward a massive market correction, as much as 90%.” Yes, you read that correctly, 90%!
If a 90% correction occurs in the stock market or even half that, it would utterly devastate millions of Americans that are invested in the market, either directly or indirectly, via their 401k accounts or various other types of investments. Economists are sounding the alarm and billionaires are quietly heeding their advice.
One option you might consider in order to protect your assets is a fixed index annuity. A Fixed Index Annuity is an insurance contract between you and a life insurance company. You pay premium to the insurance company in return for regular income payments over a period of time, beginning at some point in the future. You can fund a Fixed Index Annuity with qualifies or non-qualified funds. For example, you could rollover your 401k into a Fixed Index Annuity IRA, or you could fund a Fixed Index Annuity with cash you have saved for retirement.
The beauty of a fixed index annuity is that your principal is 100% protected against stock market losses. Premium payments to your annuity grow tax deferred, and there is no limit to how much money you can deposit in a non-qualified Fixed Index Annuity. If you rollover qualified money from a 401k into an IRA Fixed Index Annuity, annual contribution limits still apply.
Yes, the stock market has reached an all-time high, but now may not the time to celebrate. The market has been propped up with massive federal spending and quantitative easing by the Fed. Recent market performance may be nothing more than smoke and mirrors. Soon, this bubble may burst and a “correction” could be forthcoming. Will you be one of millions watching your assets go “up in smoke”? Or will you make the necessary moves in order to protect your assets from another stock market crash “correction” on the horizon?
About the Author: Cathy DeWitt Dunn is the President of Annuity Watch USA and co-host of the nationally syndicated Safe Money Talk Radio show, which airs each Sunday at 5AM. For over 15 years Cathy DeWitt Dunn has provided personal financial management to individuals and families who are looking for financial solutions that are not available in traditional brokerage houses. Each investment strategy or product she recommends is structured around protecting and growing retirement assets.
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