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Wednesday, December 5, 2012

Why having a Counter-Intuitive Approach to Investing is a Must


Whether you are a high net worth investor or an average Joe, you must reconsider all you think you know about investments. The economic climate has undergone an unheard of evolution. Common sense financial staples no longer contribute to the growing trends in the markets. Change has always been a purveyor of obstacles, yet most of these obstacles are self-inflicted.

The ability to embrace change and actually warm up to it has always been a gift of being counter-intuitive. The vast majority of our population doesn’t take well to change. The obvious emblem of this was the vastly popular book “Who Moved My Cheese” in which Ken Blanchard made the case for counter-intuitive thinking.

I submit that we are now in the greatest time of change that our society has witnessed over the last century. Everything old is not going to become new again. Unfortunately we raced towards moral hazard and have accepted the fate that comes along with ignoring the simple and common sense principle of moral hazard. The issue is not debating the virtues of moral hazard, the issue is accepting change and enriching your life through a counter-intuitive mind set about investing.

Hockey Icon Wayne Gretzky said that his success was due to the fact that his philosophy on the ice was to “go where the puck was going to be and get there first” now this is highly counter-intuitive behavior. Well, as an investor you need the same philosophy, “understand where we are headed and make decisions based upon this forecast.”

Here are several points to consider in your counter-intuitive approach:

1.      The US will be heading into recession once again.

2.      Invest in companies that are recession proof and thrive during recessionary periods.

3.      Avoid all dividend paying companies that are not recession proof.

4.      The US will continue to expand debt at an unheard of pace.

5.      Follow the financial products and services that correlate positively with increasing debt.

6.      Commodities, oil&gas, precious metals all trend upward as debt increases.

7.      The US government has set their sights on the qualified retirement plans (401k, IRA, SEP, Keogh, any ERISA based plan) which have approx. $13-16T in assets under control.

8.      The government snatch on these plans will begin with a plain vanilla tax reform act which will reduce maximums, limited tax deductions and moderate the percentages of investment vehicles.

9.      The second stage assault on qualified plans will be a mandate on what types of investment vehicles the funds may invest in (The government will require a huge percentage be invested in US treasuries)

10.  The final assault will be a GRA (government retirement account) much like social security this account will freeze your principal funds and turn them into an annuitized retirement payment with you having no control over your funds.

At the Advocacy Network our goal is to inoculate and insulate investors and consumers from scams, fraud and predatory sales tactics. This is a preventative process, not a reactionary one. In order to fully insulate you requires a counter-intuitive approach. Most people will not agree as they will stay put in the normalcy syndrome continuing to believe that things will return to the same as they once were. The rubber band has snapped and we are not going back to any familiar circumstances. The change is already occurred and is continuing to evolve, don’t allow it to consume you. Self-reliance will be at a premium and those who take a proactive counter-intuitive approach will be the biggest winners.