Ruin Your Retirement in Two Easy Steps

Here’s a slap compliments of my 100%-accurate, never-misses Grill Quotient (GQ). Yup, my “Breakfast Place Barometer of the Market” has just given off a huge indication, and it ain’t good.

This past week, one of the regulars shared his new plan to finance his retirement by trading stocks. He’s sure he can do as well trading as “busting his hump at work,” as he put it.

But there are a few problems with his new approach to his golden years…

One, he’s never traded before, and two, he has no training or experience in anything market-related.

I’d call those problems… just a bit.

But let’s back up to the first major error in his previous golden years plan that got him to this point where he has to fall back on this surefire losing plan.

When he first retired, he went into a small business with his wife as his partner in a business neither of them knew much about. Not only did it not work out, but also they argued about business issues so much they ended up divorcing.

Being in business with anyone is tough. Doing it with your spouse almost guarantees divorce. Small businesses have a huge failure rate – but it’s too often the case that if your business involves your spouse, the business has a better chance than your marriage does.

Yes, there are exceptions – but very few.

Now this man is trading for a living based only on a book he read. Do I need to go into specifics about why this is insane?

And the worst part of the story: He made money on his first few trades. Now he’s convinced he can do it, and he thinks it’s easy.

The big issue here isn’t that a Joe Mainstreet is making the same mistake Joes have been making forever. It’s that it’s a “sign of the times.”

This reminds me of a friend who, back in the late ’90s, tried to trade for a living by buying the stocks that were mentioned on Squawk Box before the market opened. The idea was to get a price pop from the TV exposure and sell on the pop.

I tried to talk him out of it, but no joy in Mudville. He didn’t last a month.

In both cases, there had been huge run-ups in the market, and both of these guys had a little success early on. And that turned out to be their kiss of death.

Another takeaway here is that both Joes made the classic error of confusing a bull market with brilliance. Ain’t gonna fly! Never has, never will!

It isn’t hard to understand how a newbie can look at what has been going on in the stock market for the past two years and conclude they can do that too. Heck, anyone with a dartboard has made money since the election.

You’ve heard me say it a thousand times: The little guy is always 180 degrees out sync with the market. When he makes his move, it’s time to tighten your stop losses.

If you’ve been around since last September, you know what happened the last time the GQ gave off an indication. We had the worst fourth quarter in decades.

I haven’t seen enough of this kind of market top behavior to say for certain we’re on the edge – not yet. But anytime a complete novice is convinced this game is easy, it’s getting very close.

As I said last September, it isn’t time to pull chocks yet. But it’s coming. Be prepared.

Make sure your exit plan is in place. The GQ says we are in for some big-time volatility, and it hasn’t been wrong yet.

Good investing,

Steve