The quick and dirty is that he blames Wall Street for rigging the game, having no regard for anyone but themselves, having stolen 20% from you over the last decade and he expects Wall Street to steal another 20% (or similar number) in the new decade.
Before you blow him off completely you should read the article. There are a couple of very salient points even if you do not draw the same conclusion that he does. Chances are some reading this will draw the same conclusions that Paul does.
In with the vitriolic commentary are a couple of things that I think are worth keeping in mind. I agree that Wall Street is not your friend. I'm not sure trying to steal from you is correct but my couple of stints at brokerage firms lead me to believe that there is not proper regard for clients by the firms (the brokers are a different story). He may end up being right about the US market being down 20% again for the decade. I happen to disagree with the number but I felt the US was a less attractive investment going back quite a few years now and believe that to be the case going forward.I don't really understand, based on the article, we he doesn't assign some portion of the cause for the last decade's poor returns to an economy having had rotten fundamentals.
The money quote from the article;
Statistically, the odds now predict Wall Street losing another 20% of your money in the next decade. The momentum's headed down. So, what should you do? Sell all your stocks, ETFs, bonds and funds. Get out of commodities and gold. Sell.
He really drives home his belief about the new decade being down 20% and that it will be Wall Street's fault. On page two he gives eight reasons why and while most of the eight reasons are legitimate risk factors I do not follow why the risk factors work out to 20% as opposed to more than 20% or less than 20%.
The first thing I thought of as I was reading the article was yes, whatever the reason, the S&P 500 was down 24% for the decade but plenty of other places were not. The countries I have talked most about since starting the blog in 2004; Ireland down 43%, UK down 23%, Switzerland down 15%, New Zealand down 5%, Spain up 2%, Singapore up 9%, Canada up 39%, Australia up 51%, Israel up 109%, Norway up 121%, China up 136%, Chile up 194% and Brazil 301%. I have not been in Ireland, New Zealand or Spain for quite a while now and reduced UK exposure meaningfully in 2007.
New Zealand (again I've had clients out for years now) and Chile might be a little off the beaten path but I've been writing about them the whole time. I would say that most of them are very easy to access with ETFs or NYSE listed stocks and if I found them they were not some sort of secret. That many are covered by ETFs and the ETFs captured the effect (even if there were any tracking error issues) even while Wall Street was stealing from you means, IMO, that success can be had in a "rigged game" even if "the house" is stealing from you.
I think it could be argued that ETFs and NYSE listed ADRs are part of wall street yet they went up (those that did) because in the case of the ETFs the things they track went up and in the case of ADRs they were part of markets that were on firmer footing with better fundamentals and they went up; Statoil (STO) and Vale (VALE) as examples of stocks I own that I have probably talked about more than any other holdings.
You may or may not be comfortable picking country ETFs or buying relative mega cap stocks from other countries but if Farrell is right about the US, even if it is for the wrong reason, as I have said previously there will be countries that thrive in the new decade offering normal or better than normal returns.
If you want to look for these countries I would suggest looking for countries with better stats (GDP, debt and so on), countries that have stuff that other countries have to have and countries I have previously labeled as in their own world which I view as countries where the population is large, young, eager to work cheaply (cheap by US standards), where life is clearly going to improve which all results in these countries becoming more important in the world economic order.
I am not too interested in Farrell's conclusions but there is utility in some of things he looked at to come to his conclusion.
The picture was taken by a buddy I used to work with when he was in Iraq. I heard yesterday that after being home for a while he is headed to Afghanistan. If you have a moment maybe you can send a good thought his way.
9 comments:
I understand his basic point, but I'm just not sure what he expects to accomplish by being in cash. I mean, he didn't even suggest putting some percentage, or a larger percentage than normal, in bonds.
Unfortunately, he's in the "make your point by exaggerating" camp.
so your blog looks OK on an Android phone; I haven't figured out if there's a mobile version of blogspot yet. I don't think there is.
Paul Farrell is Angry? No, the real issue is: Why aren't more people angry? And why are so few angry and so many defensive on Wall Street? Read in the Journal today (3/3/10): "Europe's Original Sin: National Leaders Ignored Greece's Soaring Debt for Years." Wall Street & Washington have been in denial "ignoring America's soaring debt" for far too long, and it's now biting us in the butt. Want more than my MW weeklys exposure of America's "denialism?" Catch my new blog: WallStreetWarzone.com.
What is the debt fuss about? There was a time when the national debt was a hundred bucks; then it doubled. And doubled again. and it is doubling again. And it will double again. Governments are not households and they are not business. They are different. A friend explains it this way: The economy is a giant bath tub. Stuff goes out the bottom and the Fed turns the faucets on at the top. The tub must not be allowed to become empty NOR can it be allowed to overflow. That is what is happening now.
Separately, wall street continues to fleece the retail buyer. They always have and they probably always will. The broker is never your friend and the borkerage house has an agenda that is ENTIRELY different than the investor. Mr. Farrell either doesn't understand that or has come to understand that only too late.
2008 was not a case of "fleecing the buyer."
Well, it was, but it went a bit beyond that.
Roger,
I have read Paul's new blog and he is correct. Here we are now after the dotcom and after the subprime blowup we are going into the 3rd bubble. The fed is now providing cheeper money than after the dotcom blowup. However, after a 20 year bull market of the 50's abd 60's we went into 18 years sideway bear market. We perhaps are in such a period. So let's say from 2001 + 18 =2019. Well Paul may be correct. The name of the game I think and SEG and RW are smarter and mre able than me is to sell overvalued and buy when things are in dired. Or, if do not want to take that risk then, must be defensive, as Paul was saying, When the analyst, you know, the super analyst the expert on retailors, the fatso, come out and sayes, well amazon is a super, duper stock, it is now close to a top, safer to sell what you have and sell more for a short position. Back when amazon was in the upper 130 range was flashing a sell. As matter of fact I posted here about amzn to sell.
Roger, I like your idea about country selection and am doind some study.
Best,
Jeff from Milan, Italy
I was never a proponent for government intervention, but I now see how strict regulation, especially of Wall Street, is now needed. America is the land of opportunity; the opportunity to take advantage of someone else.
Hi Roger, first time I've read Paul Farrell's opinion but it isn't the first time I've read those views - lots of people are starting to say 2012 is going to be either;
a) a disaster
b) the buying opportunity of the millennium
When so many people are fearing something because of a significance that isn't correlated (I'm talking about the Mayan calender of course) I am rather dubious of the quality of their analysis. There was a recent calender-derived 'disaster' that didn't materialize either - no planes fell out of the sky, ATMs continued to give out money and the global financial system did not seize up. And, of course, a lot of computer engineers made some serious cash in the meantime, up to the year 2000.
As to his ideas that the next 10 years will be bad for US investors - he came across as trying to say what you've been thoroughly explaining over the past few years, but in a single post. In contrast to your excellent opinions and analyses though, Mr Farrell sounded lazy, defeated, absurd, bitter and sensational. I hope for his sake he was just trying to up his readership and has some more rational and sage thoughts to share.
Love it, this almost makes me bullish on US stocks! I'll hold off though until every major publication publishes something along these lines, and everyone takes it for granted that you will loose money in the stock market.
Farrell should become an angry defeated populist democratic candidate, instead of an angry defeated financial columnist. He does appear to have the DNC talking points memorized already which will save time. At least then his audience would be eagerly expecting to hear that they are not responsible for their own investing losses ;-> (sorry to dems that was a low blow)
If think Farrell has backed himself into a tight spot intellectually by the number of things he has decided are not possible. Stock picking: not possible. Market timing: not possible. Commodity investing: not possible. Gold being more reliable than US dollars: not possible. Shorting the market: not possible. Democrats being responsible for any piece of this mess: not possible. Buying foreign equity: not possible. Being personally responsible for buying and holding a market at a rich valuation with shaky fundamentals: not possible.
I think if I believed those same things I might have written the same article. "Shucks, I thought if I crossed all these things off my mental landscape then Wall St had a moral obligation to give me money..." is how he basically started the article.
I do agree that currencies, financial markets, peaceful foreign relations, and western standards of living are going to be tremendously shaken in the coming years. I do not agree that you should divest yourself of gold and commodities to buy dollars since we are in the "hard assets up" and "equities down" point in the 18 year cycle that Jim Rogers and others have pointed out. I also disagree that statistics can "guarantee" anything LOL.
Gaius always thinks that the world is going to end so there is no reason to bet for or against that outcome because he won't be able to enjoy the payoff anyway. Titius always bets that the world won't end even when this looks like a risky wager. Titius always wins, but if the world does end then he at least ties Gaius. Optimists always win even if Farrell frowns at you as you cash your check.
What I hope for 2010 is that valiantly we work through more healing pain like that expressed in this article. Oh, and for record losses for incumbent politicians.
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