The Elephant

Four blind men were asked to give a description of an elephant. They had not seen one or ever encountered such a beast.

One grabbed hold of its tail. Another put his arms around a leg. The third gripped its trunk and the fourth walked into the side. The description given by each one was correct and accurate except it did not describe the elephant's true form. Each man was right and each man was wrong.

We now have some equally blind men trying to describe what is happening in our economy and the stock market - economists, brokers, bankers and financial planners.

The economists say that because of the interest rate cuts by the Federal Reserve and the huge inflow of cash that the economy will recover in a short time. The bankers opine that all that money that the banks are allowed to loan is not being given to their old customers and they definitely don't want to make new loans to new and unknown companies. The brokers say you are in for the long haul and don't worry the market always comes back. The financial planners have a new plan to diversify your holdings by shifting your money around to take advantage of this current market.

They are all right and they are all wrong. You cannot explain the overall economy with a single solution. We have a complex mix with new ingredients coming to our awareness each day.

To get a better look at this elephant you must stand back not only in distance but in time as well. Ask this question: Where is the country now economically in comparison to September 10 before the terrorist attack? At that time the stock market was going down and we were in a recession. Then the market crashed and the recession was officially declared. The stock market has climbed back up to where it was September 10 and the economists are telling us that the recession may be over.

However, when I look at this elephant it still looks like the same elephant. The basic portions of the economy are still slow and slowing. Unemployment is rising. The banks are not loaning money even though they have it. Venture capitalists are not putting money in new companies. Manufacturing capacity has not come back. We have weaker housing because of higher interest rates and the consumer is spending like he used to. Deflation has reared its ugly head. Most of the new spending has been on counter terrorism that is not productive and taxes have not been reduced so the consumer can have more spendable cash. And a lot more.

The stock market rally has been in anticipation of greater corporate profits that could be a long way off.

Now is the time to be wary of whom you listen to before you invest or make any changes in your investments. The elephant being described to you may not look like that at all.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

[email protected]; 1-888-345-7870

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Why your mutual fund earned you less than Nifty in recent market rally  Economic TimesThe more the number of stocks in an index, the weaker is its performance.
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MNC-themed mutual funds are top performers: Should you buy them?  Economic TimesThe consistent strong performance of MNC themed funds may be a compelling reason for investors to make space in their portfolio for these funds.
Essel Group strikes deal with lenders to avert pledged share crisis  Economic TimesThe Aditya Birla Sun Life Mutual Fund is the biggest investor, with an exposure of Rs 2936 cr.
Is your mutual fund portfolio really diversified?  Moneycontrol.comIf your portfolio consists of equity funds which have similar stock holdings, then it amounts to just duplication and may negate the positive effects of ...
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