MONEY MATTERS

Given the fact that October was the best month in four years, it is very hard to

believe that the market is actually down for the year. The Dow and the S&P

500 Index both lost almost 4% last week and are now down 3.24% and 1.74%

respectively for the year.

The interesting thing to note is that the broad markets don’t properly reflect

what is actually happening. If you look inside, you will see that industrials are

down, transports are down, small-company stocks are down, utilities are

down, commodities are down, and everywhere you look it seems that things

are down.

So how can it be that up until just a week ago the market was up a little bit?

The answer is that the largest 10 stocks in the S&P 500 are responsible for

100% of the index’s gains this year, according to Strategas Research

Partners. That is only 10 out of 500 stocks. Imagine what would happen if

those 10 lost their footing!

Only the future will tell us whether we are in fact in a bear market or not, but I

continue to believe that we are, and I am very happy that we are safely out of

the market right now. As I have reported to you over the last several weeks,

bull runs within bear markets are very common. What we saw over the last

two months continues to look just like one of those head fakes.

As they say “if it walks like a duck, quacks like a duck, it probably is a duck.”

In fact, the market is behaving almost exactly the same way that it did in early

2008 after we had recommended to our clients to sell in November 2007. We

all know what happened after that: the market went down over 50% and wiped

out years of savings for too many people.

As you know, we recommended to our clients to get out of the market in late

August. I still see the beginning of a significant downward trend.

If you are still in this market, I believe you are in great danger of losing

large amounts of your net worth. If you are over the age of 50 and are

retired or retiring soon, please do not leave your financial security at

risk.

The 2008 bear market wiped out 12 years of gains in just 17 months. I do not

want to see that happen to anybody. It is why I write this email, it is why our

advisory firm exists, it is why I do my radio show and why we have our

seminars. I want to help as many people as possible have peace of mind.

Weak economic data here at home and overseas seems to have dampened

the bullish sentiment that drove the market upward.

One of the best measures of the health of our economy is to look at the

shipping of goods by truck and rail. If it is strong, it implies that the economy is

healthy and vice versa.

Truck shipments as measured by the Cass Freight Index dropped 5.3 percent

last month from a year ago, making it the worst October since 2011. The year-

over-year decline was the eighth straight and the biggest since November

2009. Trucks transport almost 70 percent of the nation's freight by weight,

according to American Trucking Associations.

Railroads are also seeing tougher times. Shipments by rail were down 4.3

percent in October from the same period last year, according to Association of

American Railroads. This was a greater decline than expected by economists

and also continues the downward trend.

Those two reliable barometers of the US economy’s health are telling us that

we are slowing down.

What do you think? Do you think it is safe to be in this market right now? Do

you have confidence in your current financial plan? Are you protecting

yourself from what could be a significant bear market?

Overseas, the driver of the emerging world’s growth continued its steady slide

downward. China saw its shipments decline by almost 7% in October, which

was a bigger decline than any economist had estimated. This is now the 13th

month in a row of declines that are far greater than anyone expected.

Considering the massive amount of debt that they have accumulated and the

gigantic real estate bubble that they have, these are very worrisome signs for

the global economy.

All of this global economic weakness will only serve to encourage all the

countries around the world to enact more stimulus and to go deeper into debt.

I still think that we are now in a bear market and what we have seen over the

last couple of months was simply a rally within a bear. I could be wrong, of

course, but if I am, it only means that when the bear does come it will be that

much worse.

When people ask me “what do you do for a living?” I say, “we sell peace of

mind.” Our product is peace of mind. If our clients can feel peace of mind

during times of great market adversity like we have had over the last month,

then we have delivered our product.

There is nothing more important to us than that. It is our singular goal to keep

our clients from becoming poor. Preserving the wealth that they have built is

job number one for us. I encourage you to join the Money Matters family!

I believe that avoiding large losses is the single most important thing that we

should be concerned about as investors.

We want to help you to achieve your financial goals.

Thank you for subscribing to this newsletter. I hope it finds you and yours in

good health and spirits.

Cheers!

Ken