Liquid Millionaire - isaco

Stephen Sutherland
On 28 th February 2007, my clients and I exited the market. Th e market
was showing defi nite signs that something was wrong.
The market was telling me that the trend had changed from an
uptrend to a downtrend. Because of this change, we were forced to
switch our tax-free holdings into the safety of a cash based fund. After
switching out, the market then proceeded to go lower but eventually
started to rebound. Over the next 8 months, the market saw rises on
low volume (indicating a lack of demand) followed by falls on heavy
volume (indicating professional selling) further confirming all was
not well. This action kept me, my brother, our team and our clients
out of the market because it was clear to me that it was not safe to
invest.
Predicting the End of the 2003-2007
Bull Market
Even though the market did form another uptrend over this 8 month
period, it was not a market where you could make money. Let me
explain. Every time the market gained ground, it quickly turned tail
and came crashing down. It really was a horrible market environment
and it felt really good to be out on the sidelines. On 31 st October
2007, the market fi nally and offi cially topped out. It then proceeded
to hurtle south and the falls were sharp, fast and brutal. Th e Nasdaq
bear market was made offi cial (20% or more off a recent high) on 22 nd
January 2008.
But what is interesting to note is that the type of funds you have seen
throughout this book tend to drop more than the Nasdaq when the
general market is falling. Th is indicates that staying invested in such a
fund when the market is unhealthy is a strategy for amateur investors.
For example, look at what happened to this fund that HIRE CAR
found. We were fortunate to exit this fund the day after it topped, but
anybody who played the buy and hold game with this one would be
seriously licking their wounds.
146