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15 comments:
I can relate to some of the emotion that your poster was feeling, I think. I'm angry at the Wall Streeters who concocted some of the esoteric and unregulated products that helped get us into this mess. I'm confused by the so-called experts, some of whom say to stay the course while others can prove that Armeggedon is just around the corner. But mostly I'm genuinely worried that my retirement funds have been depleted to the point that I'll be less comfortable in old age.
Sure, I took defensive action. I was nicely diversified--another cruel hoax, your poster would probably agree--and overweight cash. I'm down less than the market, but that's not buying anymore groceries.
Am I getting over it? I guess. I don't bat an eye when the market loses 400 points now. Maybe it's just ennui or maybe it's genuine progress.
I do feel that this idea that you can just max out your 401k contribution year over year and expect about a 10% return on your money to be over. It is disheartening that you could have done as well or maybe even better to have your money in a high interest bearing account over the last 10 years than in the widely used S&P500. When you look at what these fund manages are making in salary and bonuses off our money, and you look at what we are making on our money it does look like a bit of a scam. I feel that the excesses of the last decade may lead us to a Japan style market, where we will have gone nowhere come 2020. What if everybody did start living below their means and saving more, a good idea, but what will that do to this economy that has been built on easy credit, excessive lending and mountains of debt. It looks pretty lethal for our economic future. I certainly don't plan on putting my hard earned money into equities as I have always done in the past and I expect that many baby boomers are feeling the same way.
Of course the market is a ponzi scheme.
Unless you are investing in specific individual firms on a long, long buy and hold basis.
Oh yeah, people have done great on a long term basis in GM, Ford, Lehman Brothers and many, many other long term holdings of companies that were/are considered great companies. Is, or isn't, buy and holding going to be dead money for the long term going forward, that is the question.
Roger. I have heard it said we are now in the flat-to-bearish phase of the market's 30-year cycle. Here is a link to an article about a 40-year cycle:
http://www.prudenttrader.com/ptltr110808.html#Section2
From the chart in the article, the market has had up-flat years approximately as follows: up 1902-1929, flat 1929-1950, up 1950-1966, flat 1966-1983, up 1983-2000, flat 2000-present. The 2 completed flat periods were 21 and 17 years long. If history repeats itself, the current flat period will not end, reverting back to the 30-year cycle theory, until 2015 or so. Does the 30 or 40-year cycle theory influence your investing and, if yes, how? Thanks, JCarr
i dont really think about 30 year cycles. it is possible that some of the thing i have theorized about tie in to this stuff, but I don't think about it in they way you are probably asking.
perhaps the despondent person felt like story:
________
"Once upon a time in a village, a man appeared and announced to the
villagers that he would buy monkeys for $10 each. The villagers,
seeing that there were many monkeys around, went out to the forest and
started catching them.
The man bought thousands at $10 and as supply started to diminish, the
villagers stopped their efforts. So the man announced that he would
now up the price and buy at $20. This renewed the efforts of the
villagers and they started catching monkeys again.
Soon the supply diminished even further so the offer increased to $25
each and the supply of monkeys became so scarce that it was an effort
to even see a monkey, let alone catch it!
The man now announced that he would buy monkeys at $50! However,
since he had to go to the city on some business, his assistant would
now buy on his behalf.
In the man's absence, the assistant told the villagers. "Look at all
these monkeys in the big cage that the man has collected. I will sell
them to you at $35 and when the man returns from the city, you can
sell them back to him for $50 each."
So villagers rounded up all their savings, and bought all the monkeys
from the assistant. They then sat back and waited for the man to
return from the city.
However, they never saw the man, nor his assistant, ever again... only
monkeys everywhere!
And so my friends, you now have a better understanding of how the
stock market works."
................................
Good one Anon 11:51, my favorite is:
In a town with 512 heads of households, a man sent out 512 postcards to each home,
half with the message, "the market will go up tomorrow" and the other half, "tomorrow the market will be down."
The market was up the next day so he set aside the addresses of those he sent a "down" card to and sent out 256 postcards to the remainder with the same split, on half he wrote, "the market will go up tomorrow" and on the other half he wrote "tomorrow the market will be down."
The market was down the next day so he set aside the addresses of those he sent an "up" card to and sent out 128 postcards to the remainder with a split as before.
The market was up the next day so he set aside the addresses of those he sent a "down card to but varied his message to the final 64 who had now received three (3) 'correct' market calls, simply writing instead, "to find out what the market will do tomorrow send me $1000."
To all the addresses he had set aside because they received an 'incorrect' call he sent an advertisement listing all the 'correct' calls with the message, "Tired of receiving bad investment advice? Buy a subscription to my newsletter for $100 and receive accurate market calls."
And he actually did write the newsletter too, investing his own proceeds accordingly because with a record as good as his, how could he lose?
The real investors are having fun! The IRA's, the 401's, etc are the vehicles for their pleasure. How many of the them ever read an annual report? Do any reports of them reveal the future. How would the report on GE read? Investors were told that instead of dividends, cash would be plowed back in the business. There go the growth stock....and your investment. Now you have neither. Directors have lavished untold wealth on the Corp. Execs. What does that tell you? WE ARE SECOND RATE! Will the stock market return? Couldn't say but I think we are entering another trap: the bond trap.
You seem way too optimistic. Note bond yields. Note the gov't crowding that will occur. Note the tremendous rolling over of short term credit. Can you see $50 for S&P earnings next year?
I fear more down is coming.Not like 2002-3, more like 73-74. Real Ben Graham values.
73-74 and 2002-03 the declines were the same. if you mean PE ratios single digit pe ratios in this environment would be a real collapse and not comparable to 73-74--it would be much worse than 73-74. getting there would mean a 75% decline from the peak, and right I am not expecting that but i have a lot of cash in case that is what happens.
When you say copper, you are referring to the fact it's in printed circuit boards/semiconductors/whatever? So would a copper stock like FreeportMcMoran (or something, not asking for a specific recommendation here) capture that?
I don't believe there is a copper ETF like gold has GLD.
Thanks...big fan of your big picture videos!
iPath has a copper ETN.
Copper goes into building everything (a bit of hyperbole) inclduing circuit boards. Demand for it goes up before demand for finished products.
Powershares has some sort of product with a few base metals including copper.
Thanks, I searched after you said iPath and its ticker is JJC.
For anyone else curious http://finance.yahoo.com/echarts?s=jjc#chart3:symbol=jjc;range=1y;compare=fcx+^gspc+pcu;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined
Going to read up on this a bit.
Roger,
Isn't what you are describing the emotions that surround a paradigm shift. Seems to me we investors and the market evolve. Far from certain regarding the order of our past practices, maybe something like this:
Buy and hold to modern portfolio theory.
Passive to active.
Equity diversification to Equity/International diversification.
Eqt/Int diversification to Eqt/Int/RE.
Eqt/Int/RE to Eqt/Int/RE/Natural Resources.
Eqt/Int/RE/Nat to Eqt/Int/Re/Nat/Commodities.
And lastely adding hedges.
Seems to me like we are in a period that will be defined by a shift to another modification of the portfolio. Not sure what the added portion will be. I hear you in your blog, trying to listen for different ideas. While you and your readers listen they are being bombared by the media giving credence to the old remedies as the ones that should be followed as a path to future success. The lessons learned from this market will be applied by the investment community and individual investors into strategies of the future. Directing the energy of the pilot toward how to avoid crashing the airplane the same way in the future is probably a better use of time than having him walk around the crash site everyday.
The paradigm shift is coming, but until it does (and it always does), your advice to keep invested and listening for the shift makes good common sense.
Thanks for your terrific column. Keep up the good work.
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