The Rest of the Stock Market Story:
What the Media and Your Broker Won’t Tell You
By Anthony A. Saccaro, ChFC
THE REST OF THE STOCK MARKET STORY:
What the Media and Your Broker Won’t Tell You!
By Anthony A. Saccaro, ChFC
Providence Financial & Insurance Services, Inc.
Executive Summary
Have you wondered why your retirement portfolio hasn’t grown in the last decade even though
your broker and the media both say that market growth averages 10% per year?
A 10% return per year means that your portfolio will double every seven years! Has that
happened? Why not? Who’s not telling the truth?
This report will answer that question and put the pieces of the puzzle together. You will learn
why what you’re being told is only part of the story.
As famed radio announcer Paul Harvey used to say, “Here’s the rest of the story.”
Historical Stock Market Trends
First, do you believe that over the long run, history tends to repeat itself more often than not?
I’ve asked this question thousands of times and find that nearly everyone answers “Yes.”
What if I told you that, contrary to what you may have heard, there are predictable and
repeatable trends in the stock market. Do you think that knowing what these trends are just
might help you make better investing decisions?
Then let’s uncover these well-documented trends together by first looking at the last dozen
years of the Dow Jones, illustrated in Figure 1 on the next page.
The Rest of the Stock Market Story — 1
Do I See a Pattern Here?
You’ll notice that back in January 2000, the Dow Jones was around 11,700. Then, over the next
two years, it dropped nearly 40% to a low of 7,200 in October 2002. Over the next five years, it
climbed back to 14,000 in October 2007, exceeding its previous high in 2000. Then, over the
next two years, it crashed nearly 55%, reaching a low of 6,500 in March 2009. From there it
climbed back to around 11,700 in December 2011.
Are you seeing a pattern here? The market drops and then comes back up. Then it drops again
and comes back up again. Over the last 11 years or so, the market has crashed twice and
regained its losses twice.
Of Bulls and Bears: What’s the Difference?
So then, why is everyone saying we are in a bull market? It is primarily because the media,
which is heavily funded by the big Wall Street firms, is telling you that we are in a bull market.
So are they lying? Not necessarily, but it’s also not the full story.
The difference lies in how they define a bull market versus how I define a bull market.
It is clear from looking at Figure 1, from point A to point B and then from point C to point D,
that we are in a bear market. However, after the market has hit a bottom and has started to
climb again, the analysts theorize that the bear market is over and we are back in a bull market
again.
The Rest of the Stock Market Story — 2
But let me ask you, if your portfolio is down by 50% or more after the stock market crashes,
does it feel like the bear market is over to you? Of course not! Most of my clients tell me that
the bear market is not over to them until they get all of their money back and start making
money again.
You see, the analysts, who are employed by big Wall Street firms, say that each drop is a bear
market and each recovery is a bull market, but if the bears and the bulls keep washing each
other out, how much money are you making?
ZERO!
Come Again? How Much Money Am I Making?
To ask it a different way, if the Dow was at 11,700 in January of 2000 and is again at 11,700 in
January of 2012, how much money did you make over the last dozen years? ZERO!
And, if you’re paying fees all these years, you may have actually lost money! So how then can
anyone say truthfully that the stock market averages 10% return per year?
Once again, the difference is in definition: how they define a bear market versus how I define a
bear market. Whereas they claim that a bear market is when the market is going down and a
bull market is when the market is going up, I define a bear market as the entire cycle in which
the bears and bulls are washing each other out providing a zero return.
My definition is peak to peak, or point to point, and includes all the ups and downs that are
washing each other out in one cycle. Most of my clients tell me that my definition is how they
would define it as well.
What About Averages on Return?
You see, the key word is “averages,” but averages can be misleading. For example, my wife and
I run 11 miles per week, on average. Doesn't that evoke a mental picture of me and my wife
being healthy, running down the trail together?
But what if I told you the rest of the story, that she actually runs 20 miles per week and I only
run two miles per week? Doesn’t that evoke a totally different mental picture?
While it is still true that we run an average of 11 miles per week, it is not the complete story,
just like telling you that the stock market averages 10% per year is also not the complete story.
In order to get the rest of the story, we need to look at the history and trends of the stock
market, lest you think that the last 11 years is just a fluke.
The Rest of the Stock Market Story — 3
Bull and Bear Market Cycles: 30-35 Years
If you look at Figure 2 below, you’ll notice that we have two columns, a bear market column
and a bull market column. As you review the information in the columns, remember that these
are bear market cycles and bull market cycles. In other words, the bear side of the chart reflects
the time periods Dow Jones has ups and downs that wash each other out and produce a zero
return, while the bull market side produces a positive return.
As you review Figure 2, notice that according to history, the bear market cycles tend to last
between 16 and 25 years while the bull market cycles tend to run anywhere between 13 and 18
years. So then, how long does it take to go through both the full bear market and bull market
cycle?
According to history, between 30–35 years.
History clearly shows us that there are long periods of time in which the market produces zero
return followed by long periods of time in which the market produces 15+% return. Therefore,
in order to earn the 10% return that the market averages, you need to keep your money there
through both cycles!
So, the next time you are tempted by that 10% return that Wall Street keeps promising, ask
yourself if you have 30-35 years before accessing your funds, since that’s the time horizon
needed. The stock market does average 10% return per year, but only if you leave your
investments there through a complete bull and bear market cycle as illustrated.
And that is the rest of the stock market story.
The Rest of the Stock Market Story — 4
Calling a Spade a Spade
Now that you have a better understanding of how the stock market really works, let’s conclude
with why this information, which has been around for decades, is new to you. Most stock
brokers and financial advisors work with large firms that provide them with research. Do you
know what the primary product is that these large Wall Street firms sell?
STOCKS.
Therefore, if you walk into one of these large firms with a fistful of cash, what are they likely to
sell you?
STOCKS.
There’s a reason that stockbrokers are called stockbrokers.
I’m sure most stockbrokers want to do a good job for their clients and are well-intentioned.
However, since these stockbrokers are limited in the investments they can sell and since they
are getting their information from their own firms, they are swimming upstream with one arm
tied behind their back. Why? Because most brokers don’t know what you just learned.
Think about it. They are getting their research from their employer whose primary product is
stocks. If the brokers knew these trends and thought that the market would produce a zero
return for the next 15-25 years, do you think that they would really want to sell stocks? Of
course not!
Let’s take it further. Do you think that the CEO of one of these firms would ever have a meeting
with all of their stockbrokers and tell them not to sell any more stocks or mutual funds because
we may be going into another 15-25 year bear market cycle? Of course not! It would never
happen. Therefore, this information never gets to the sales representatives who need it most.
If they don’t get it, then you don’t get it, which is why you may never have heard this viewpoint
before.
Why is Fiduciary Responsibility Important?
Finally, do you know who these big Wall Street firms owe their fiduciary responsibility to? Is it
the folks who have their portfolios with them? Absolutely not! These firms owe it only to their
shareholders. In order to be a shareholder, you need to own the stock of the firm you have your
portfolio with. Having a portfolio with the firm simply makes you a client, not a shareholder.
For example, what would happen to the price of the brokerage firm’s own stock if they
announced that their clients should not buy stock because there is probably a 15-25 year bear
The Rest of the Stock Market Story — 5
market cycle coming where stock prices are likely to remain at zero? The firm’s stock price
would certainly go down, if not crash!
Would that be in the best interest of the shareholders who own that stock? Of course not! You
would be better aligned with your brokerage firm by owning their stock than just having your
investments with them.
Hopefully, you are putting the pieces of the puzzle together and seeing why the information
that I have shared with you is probably new to you. But please don’t blame your broker
because it’s not his fault.
The fault lies in the entire industry, which needs to be fundamentally changed. Don't hold your
breath though as that scenario will never happen. Since Wall Street controls the stocks and
benefits the most from them, it would not be in its best interest to initiate change.
Why is Dealing with a Registered Investment Advisory Firm Important?
So doesn’t Providence Financial and Insurance Services have the same problem? No. Since we
are a Registered Investment Advisory irm, we have a fiduciary responsibility to our clients and
not to a particular firm. We don’t work for another broker or dealer.
Additionally, because of how our firm is structured, we have access to nearly every investment
and savings product that is publically available today. This removes all restraints and allows us
to freely serve our clients in a completely non-biased manner.
Summary
There is an entire universe of non-stock market alternatives that exist, many of which
stockbrokers can’t legally talk about, that are designed to yield 4%-7% interest per year without
the risk associated with stocks. Providence Financial has specialized in these alternatives since
the firm’s inception in the late 1990s, and whereas your broker may not be able to tell you the
rest of the story, we certainly can.
Call us at 818-887-6443 or 800-256-3513 to find out how Providence Financial & Insurance
Services can open the universe of investment options to you so you won’t get lost in the
unsteady and risky world of stocks.
© 2012 Providence Financial & Insurance Services, Inc., Los Angeles, CA, USA. All rights reserved.
The Rest of the Stock Market Story — 6
ABOUT THE AUTHOR
Anthony A. Saccaro, ChFC, is a financial planner, Investment Advisory Representative and
president of Providence Financial & Insurance Services, Inc. Since 1999, Saccaro has consulted
with thousands of individuals about their finances. He is passionate about educating and
coaching clients on their options so they can make clear and informed financial and retirement
decisions. Working together, he helps his clients develop a financial plan and income strategies
for a secure future.
Saccaro has written many articles and spoken frequently in public about estate and financial
planning strategies, and is an Advisory Board member for Senior Market Advisor, a highly
recognized industry publication.
ABOUT PROVIDENCE FINANCIAL & INSURANCE SERVICES, INC.
Providence Financial & Insurance Services specializes in conservative investment strategies and
estate planning for baby boomers and retirees. Its mission is to help educate its clients on the
myriad of investment options and income strategies so they can make informed financial
decisions for a secure future.
Providence Financial & Insurance Services, Inc. is a Registered Investment Advisory firm
registered with the Department of Corporations in the State of California:


California Department of Insurance, License# 0C62654
California Department of Corporations, CRD# 141988
Providence Financial & Insurance Services, Inc.
20335 Ventura Boulevard, Suite 125
Woodland Hills, California 91364
818-887-6443 | 800-256-3513
[email protected]
www.providencefinancialinc.com
The Rest of the Stock Market Story — 7