On “Market meltdown refutes ‘efficient markets’ theory,” Kate Gibson of MarketWatch interviews market strategist, Nicolas Colas, who questions the validity of efficient markets and other common notions upon which our modern financial theory is based.

An “efficient market,” according to the traditional financial and academic community is supposed to “efficiently” factor in all available information in its price. This obviously wasn’t the case with the recent market meltdown, as investors and financial experts had all the information (in company filings and reports/news about the housing and mortgage markets) right under their noses, yet ignored the news until companies started failing.

The recent debacle also throws out the window the notion that holding stocks for 5 to 10 years will produce almost sure returns.

Colas wraps up with an important comment: “What I’ve tried to say is don’t baseline your expectations on the notion that markets are as efficient as the academic world wants to believe, think for yourself.”

We’ve been preaching that for years! It’s time to change and upgrade investors’ way of thinking.

Start by attending our free training.

If you haven’t seen Jon Stewart hammer ex-hedge fund trader and CNBC commentator, Jim Cramer, on The Daily Show last week yet, I strongly suggest you watch this video.

Jim Cramer is the loud clown that hosts CNBC’s Mad Money at nights. I’ve never really understood why anyone would pay attention to this joker, let alone listen to the over-hyped crap he has to say about stocks. I often pondered at CNBC’s decision to air his investor-dumbifying nonsense. It is obvious that the network’s objective is to entertain and boost ratings rather than inform and educate the investment public.

During this video, Stewart criticizes Cramer for his shameless admission of manipulating stocks and using various techniques to profit from short selling. He also bashed Cramer and CNBC for failing to warn investors of the pending banking crisis and for indirectly promoting it by letting officials from many of the companies that got us into this mess to lie to our faces on air.

Even though we knew for years where this blatant market manipulation and greed would take the stock and real estate markets, it still makes me sick to my stomach to watch this interview. This should be a wake up call to all those who have swallowed the “invest-for-the-long-term-and-trust-your-financial-advisor” lies that our country has been brainwashed with for decades.

Madoff keeping Baby Boomers out of the stock market? At least that’s what this Market Watch story suggested.

I cracked my ASSets off when I read that. Was Madoff really the culprit in the desire of Boomers to shun equities? Common! Get real!

It is true that what this Jewish con man and ex-Nasdaq Chairman did does not really inspire confidence in traditional stock investors; milking many wealthy and non-wealthy alike dry without placing even a single trade in his alleged “investment fund.” Nevertheless, this is far from being the main reason.

The fact of the matter is that excess greed and rampant speculation have truly brought the astronomical risks of the stock market to light – and investors [Boomers and non-Boomers alike] have lost over half their wealth in stocks; bleeding trillions and trillions of dollars in losses.

How’s that for discouraging?

The key going forward will be whether or not investors will stand firm, stay positive amidst a negative global environment, and – most importantly – look for DIFFERENT ways to invest their hard-earned money.

Like Einstein once said, “The definition of insanity is doing the same thing over and over again and expecting different results.” Investors who personify this definition will continue falling prey to the stock market machine.

It’s pretty bad.

I’m glad that in our world of forex trading, stocks just aren’t welcomed! In fact, I have been in favor of alternative investments instead of stocks and the economically-sensitive real estate sector for years.

Since my post, “Stock Market Trades Below Key Support Level,” the Dow has fallen further. Just look at this cool chart to compare the magnitue of our little, never-ending stock market roller coaster ride in the US:

Click on the chart to enlarge it, then hit the Back button to return to this blog post.

The current bear market, which began in late 2007, is still alive and well. So far, only the extremely painful bear market of the Great Depression era (grey graph) is greater in magnitude. It actually took the stock market during that time a painstaking 25 years (from 1929 to 1954) to recover and exceed the peak it established before the bear market began.

Even though no one knows how long the current bear market in US stocks will last, a VERY SLOW recovery (also known as an L-shaped recovery) is a likely outcome.

I strongly believe that traditional investors who haven’t already realized the colossal risks inherent in stocks, will certainly do so during this slow-motion recovery period; especially those who give in to the “buy-at-dirt-cheap-prices” recommendations of many of today’s traditional investment advisors and financial planners.

This realization of the “true risks” of stocks might cause investors (both domestic and foreign) to “reprice” equities in their heads for decades to come, paying relatively lower multiples for each dollar of a company’s earnings. Consequently, annual stock market returns going forward could drop significantly – way below the historical 10%-mark.

Even if we assume a 5% annual rate of return for stocks from this point on, it will take the market over 15 years to recover to the peak value established in 2007 (near 14,200 on the Dow). Is the wait really worth it?

Due to the significant risks and opportunity costs I feel traditional investors will face going forward, I plan on writing a series of blog posts to address these issues in greater detail. My objective will be to educate investors and help them understand the true risk of the investment decisions they make, as well as the advantages of alternative investments.

I think this information is priceless and will help investors pull away from the traditional stock-market-and-real-estate-masses group; a must to survive any future crisis.

The hits just keep on coming as the Dow Jones Industrial Average (Dow), the most popular US stock market index, closed below the 50%-retracement level.

Traders familiar with technical analysis know that when the price of anything falls 50% from a peak, it tends to be “supported” from falling further – but if this level doesn’t hold, the price could accelerate quickly to the downside.

The all-time high for the Dow was 14,198.10 on October 11, 2007. If we take half of that level, we come up with almost 7,100. Last Friday, the Dow closed around 40 points below this level – leaving many wondering what would happen on Monday. Well; on the first day of trading this week, the market was basically on a downhill slide from start to finish, causing the Dow to close at 6,763.29.

Now that we’re obviously past the 50% mark, what may lie in store for the most popular financial market in America? Probably nothing pretty.

Hold on to your hats ladies and gentlemen. My guess is that the wild ride will continue, as the US keeps rewarding crooked giants like AIG and speculators who gambled their ASSets away in real estate.

When will investors learn that the world does not revolve around stocks?!?!? Do I hear anyone say “forex?”

The stock market got hammered again today. The Dow Jones Industrial Average (Dow) was down over 3% to a close of 7114.78. That’s about 50% off from its high near 14,000 in 2007. Trillions of dollars of wealth continue to evaporate with the perpetual decline.

But this is nothing new. I have been warning others about this for years – since late 2004; bugging the hell out of everyone I knew. Since the first Forex managed account webinar we had in early 2005, we tried pounding it over and over into investors’ heads. “Get out of stocks! Get out of real estate! They are freaking bubbles!!!”

Even since late last year, as some thought stocks would recover, and as the idiotic stock analysts and portfolio managers on CNBC preached to continue investing in equities, I told everyone I knew to get out of the market (please read “The Ugly Side of Traditional Stock Investing” in the Day Trading Tutor blog).

But unfortunately, people have an almost mystical attraction for the wonderful world of stocks; continuously trying to catch falling knives as they drop and drop and drop….

It’s quite ugly already, but it could get uglier – believe me!

Another by-product of this widespread, exponential wealth reduction phenomenon is the destruction of even more wealth in various Ponzi and pyramid schemes that suffer blow-ups due to a shortage in cash. Just look at the recent ones like Allen Stanford’s and Bernie Madoff’s. There will probably be a lot more.

Most of these problems (including the astronomical losses in stocks and real estate) could have been avoided if investors would have put their greed hats on the shelf and used a bit of common sense; but, unfortunately, they never do. Greed and ignorance always take them over.

Even though the damage has already been done, I will write a few articles soon to help educate both investors and traders going forward; education that will hopefully stop the bleeding and prevent future hemorrhages. Hopefully!!!!

Start by learning about alternatives. Register for our free, live training here.

Americans’ love affair with stocks has caused the delay in many retirements (perpetually in some cases).

This historical credit crisis and real estate bubble blow-up has impacted 401(k) balances across the nation – as well as IRA accounts and non-retirement stock portfolios. Even diversified bond portfolios have gotten whacked, as corporate debt across traditionally “solid” (yeah right!) sectors, such as financial services and insurance, have suffered devastating blows (due to blatant gambling with real estate).

We’ve been warning people against this for years, but unfortunately, the stock-and-bond-centered traditional views of retirement and financial planning are too ingrained in the minds of many investors. It takes a lot of unbrainwashing to bring people out of that spell.

But don’t get me wrong here. I’m not rubbing it in. I feel a lot of sorrow for what our country is going through right now (and it can get A LOT worse). I just want people to throw the traditional investment pyramid in the garbage and open their minds just a little bit. Don’t wait for your stocks to drop to the level of Lehman Brothers (i.e., zero) to take action.

There are other ways to add diversification and safety to your investment portfolio, without lowering your return to that of bank savings accounts. Even though, I’m a fan of day trading (but not with stocks), that should only be a small part of your financial pyramid; assuming you learn to day trade correctly (sign up for our free training and start learning). Most of your pyramid should be composed of investments that provide an attractive return, but with little market risk; investments that your overdressed broker at Merrill doesn’t know about.

During critical times like these, retreating in a fetal position to a dark corner of your closet while sucking your thumb and crying for your momma is not the best solution by far. You need to be proactive and take action early – and don’t wait for any politicians to rescue you (they’re only interested in saving the fat, corporate pigs that caused this mess in the first place).

So what do you do then?

Sign up for our next day trading webinar by clicking here. Believe me; we’re not only going to talk about day trading.

If you want to read the entire article about the heavy toll stock losses are taking on retirement savings, click here.

New day traders always want to know how “others are doing it.” This is a natural desire that applies to any subject of interest. It is extremely helpful to know how professionals do their “thing.” That’s why I put this DTT section together.

I have met traders from all over the world; some good, some bad, and some just plain ugly. I work with a handful of extremely talented forex day traders who have become very good friends. This has been a true and priceless blessing for me. My goal is for some of these traders to post useful, in-the-trenches information in this Traders Views section: their take on the market, tips on how to trade, platforms and tools they like, etc. I don’t know exactly what this section is going to look like at the end, but I know that many new and experienced traders should benefit from the written wisdom and experience.