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Is the “cult of the equity” dead? Institutional investors have slashed their equity...

  • Friday, May 25, 2012, 6:10 PM ET
    Is the “cult of the equity” dead? Institutional investors have slashed their equity holdings over the past decade. Stocks have not been this far out of favor in over a half a century. “Ultimately what is going on is that fundamental tenets of capitalist society are being questioned,” says Allianz's Andreas Utermann. This is stunning in light of overwhelming evidence that, in the long run, equities outperform. From 1900 to 2010, they beat inflation by 6.3% a year in the U.S., compared with only 1.8% for bonds.
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This news story has 20 comments:

  • I can't wait for the comments on this one. I bet 90 % will agree that equities will never come back and cite all kinds of reasons that have been on the cover of pretty much every other magazine for 3-4 years now.
    25 May 2012, 06:28 PM Reply Like
  • Blackrock said investors should be 100% in equities back in February. Hyperbole or not, they weren't joking. I wouldn't short bonds--too many factors can keep yields down, i.e. the Fed, Chinese dollar reserve accumulation, demographics in the developing world--but I wouldn't buy bonds either.
    27 May 2012, 02:59 AM Reply Like
  • If not dead, its certainly dying. Look at all he stocks that have just been decimated during the last six months. FSLR from $140 to $14. NFLX, CHK, MCP, materials, GMCR, all COAL, NG. You watch these stocks loose 60-70% value in 6-9 months and wonder why retail wants to stay clear? To regain some confidence in the markets, for starters get rid of or limit the HFT that move prices around 5% daily, limit the short-selling that tends to cause value to drop, and bring some accountability to the CEO's that pilfer the cash drawers as the stock price plummets. Why would anyone feel comfortable buying an equity when you know the next day it could drop 10%.
    25 May 2012, 06:29 PM Reply Like
  • Value investors that did their due diligence wouldn't have been in those stocks to begin with.
    27 May 2012, 03:00 AM Reply Like
  • Personally I have become much more convinced that the game is rigged against the individual investor. However, I still believe it is the only game in town to make money; one just has to work harder at it.
    25 May 2012, 06:35 PM Reply Like
  • Being successful in anything usually means hard work. Not sure why people think it should be different in the investment world. The world being rigged against you just means that you can't rely on what worked yesterday and is generally known already.
    25 May 2012, 06:38 PM Reply Like
  • If by hard work you mean looking at financial data, 10k's, quarterly reports, etc...well that seems to no longer matter nearly as much as to did a decade ago. Some seemingly stable companies have still seen their values drop.
    26 May 2012, 08:00 PM Reply Like
  • Values, yes. Though a more accurate term might be "price". Prices have dropped. So what can we do? Here's my solution: look for companies with share repurchase programs in place and/or stable dividends (with which to reinvest in the shares).

    Lower prices are an opportunity.
    27 May 2012, 03:11 AM Reply Like
  • In what sense can equities be "out of favor". Somebody owns them, no? Are public companies going private? Facebook just added $80B worth of equity to us public markets, so I doubt it. I thought SA was a step above this kind of commentary.
    25 May 2012, 06:39 PM Reply Like
  • Of course they can be out of favor, despite people owning them. One does not rule out the other. It just means that they trade really, really cheap, because of excessive risk aversion. No fresh money comes into the market; nobody wants to take any risk anymore.
    25 May 2012, 06:42 PM Reply Like
  • The claim here isn't that they are cheap (which would have been a dubious, but not incoherent, claim.) The claim is that people have "slashed their holdings." Does facebook look cheap to you? Not to me. The fact that it is now a 90B$ company instead of a 120B$ company just means it was priced too high to start. It doesn't mean "facebook can't raise capital". That's a preposterous claim for a company that just priced itself at $120B.
    25 May 2012, 08:55 PM Reply Like
  • Is Facebook representative of all global stocks? Have you looked at some of the valuations lately, particularly in the international space? Italian stocks for example trade at half book value on average, with a dividend yield above 6 % and a single digit P/E.
    25 May 2012, 10:58 PM Reply Like
  • The article uses facebook as an example of how companies dont have access to capital markets because "stocks are out of favor." It wasnt my example. Are Italian stocks out of favor? Damn right they are. For good reason? A lot of people would say yes. But why are we talking about that? This was not an article about Italian stocks being overly punished.
    25 May 2012, 11:06 PM Reply Like
  • The Facebook example was obviously misplaced in that article, but it was correct in pointing out that on average stocks are out of favor.
    26 May 2012, 08:20 AM Reply Like
  • There is no shortage of constant bombardment from not only Obama and the left wing progressives, but the lame street media are pushing this perversion of Obama's, the "Fairness" thing!

    God had to be killed off,
    the early progressive movement saw to this.
    Next came the "Revisionist history".
    Then you had to get people dependent on the government, F.D.R and L.B.J..

    You know one really crazy stat that always sticks in the back of my mind,
    after 3 terms of F.D.R,
    what was the first thing Democrats and Republican's agreed to do?
    They passed a constitutional amendment that the country would not be subject to the insanity of any president for more than two terms!

    The next chapter of this progressive / socialist / communist manifesto has been going on now since the end of Dubya's administration.
    When Hank Paulson "Whipped out the Bazooka" and Bernanke and Geithner scared the crap out of congress with their "DEPRESSION" rant and demand for 800 billion dollars to forestall said depression.

    This fateful move was the turning point, we all became socialists when Barry was sworn in!
    How could we have expected any less from him?
    Michelle even said as much in one of her very few comments during the 2008 election,
    Barack knows we will have to change things, the way we talk, they way we think, the way we act, etc,etc.

    The "Transformation" was not to be taken lightly,
    it is in full swing today and I would argue we are in the DEPRESSION they were so eager to avoid in the first place.
    47 million Americans on food stamps!
    You don't have soup lines only because the checks are in the mail / debit cards.

    O.W.S. and the union influence, (Trumka / Stern and Stephen Lerner), Lerner, it turns out is so proud of his own son being arrested, he is the founder of O.W.S., but who would have guessed?

    The chants of "Death to Capitalism" and the perversion of our morals to the point of things now being seen as more "When right becomes wrong, and Wrong becomes right",
    fits in perfectly with the grand mother of all things socialist, Frances Fox Piven.
    You know, the "Collapse the System" and fan of the "Watts Riots" of the 1960's!
    Good old Frances is still at it,
    invoking the youth to "Get out in the streets" and protest / "change" things!

    The president does not seem to share the ideals of the country, he considers our constitution a "Charter of Negative Liberties", a old relic!
    Job one on day one?
    Send the bust of Winston Churchill back to the Brit's!

    We now have "Social Justice" where we once prospered under "Equal Justice",
    We now have "Collective Salvation", where once great spiritual leaders like M.L.K. once preached "Individual Responsibility" and stood proudly for "Individual Salvation"!

    Jesse Jackson / Al Sharpton our President are all for O.W.S. but seem to feel threatened by of all things,
    "The Tea Party" and the like of Glenn Beck?
    Really?

    I agree with the author,"..The fundamental tenets of capitalist society are being questioned"

    NO where is anyone man / woman enough to come out into the sunlight and say what they are willing to replace it with.

    I could not DISAGREE with Van Jones more.
    But I respect him because he says what he means and means what he says!
    Van is a "COMMUNIST" and proud of it!
    He wants to "TRANSFORM" America into some quasi communist / "Fabian Socialist Society" utopia.
    At least he is willing to lay it on the table, the lame street media is dancing around the edges and trying to hide the presidents motives behind "smoke and mirrors" and double talk that no one believes anyway!

    2008 was a stain on our republic!
    2012 is the chance to right a wrong!
    Will America and the republic still stand?
    The individual,
    the one person who is thinking.
    The one person who will act,
    each and every American will decide the countries fate come November!
    Let us not fail for sitting down!

    May the good lord watch over this fragile little experiment in freedom we call America
    25 May 2012, 06:52 PM Reply Like
  • Due to such factors as fragile economies (both domestic and international), a perceived "rigged" game (first thought here is HFT and short selling, as noted above), an unfavorable, anti-capital political climate picking winners and losers, etc., investors have responded with a shift into safe havens, such as the low-yield Treasuries. Hopefully, it is a temporary shift, regulations (especially re HFTs) will work in our favor, and buyers will dig in with both hands. Matter of time. (Hope that isn't just my glass-half-full attitude speaking.)
    25 May 2012, 07:37 PM Reply Like
  • Personally, I think that more and more people realize that the corporate governance structure is broken.

    Stock options should be eliminated for anyone being hired at a publicly traded company. Private firms can do what they want, but public firms will have to pay salaries and bonuses in cash. The stock option really only came into use when Congress passes punitive taxes on salaries over $1 million dollars - in one of their typical "react to the media outrage" when it was reported some CEO's were making over a million a year and the company wasn't doing well.

    The result - now those CEO's get $20 million in all kinds of compensation instead of $1 million!!!

    Boards should be limited to 20% individuals with personal/professional relationships with the CEO. Far too many companies are stacked with the CEO's golfing buddies - he pays them absurd amounts to be directors... and they rubber stamp his insane compensation.

    All funds of more than XXXX amount should be forced to publicly vote their shares and report to the fundholders why they did. That would put some pressure on the "passive" stockholders that today are simply voting yes on everything. When they publish that they voted for some of these stupid pay packages there might be more outrage - and it might result in people moving their money to funds that take a more active role.

    I'm sure there are more good ideas on how to reform the system.
    26 May 2012, 12:10 AM Reply Like
  • "Is the “cult of the equity” dead is stunning in light of overwhelming evidence that, in the long run, equities outperform''. What kind of crap is that? In many companies shareholder money is just used to pay huge amounts to executives. What is stunning is that people still buy some shares - check the latest ''can't lose'' IPO of FB and then check all the hype before the IPO from the geniuses at CNBC and others like them.
    26 May 2012, 02:49 AM Reply Like
  • “Ultimately what is going on is that fundamental tenets of capitalist society are being questioned,”

    What capitalistic society? There is no such thing as bailouts, TBTF and forced (squashed) interest rates in capitalism. We live in an Oligarchy.
    26 May 2012, 08:13 AM Reply Like
  • I t has been amazing to me to watch the daily shares traded drop by half....but yet the market keeps going up.....yes to me this is rigged....TPTB can not have your 401K look bad..so they prop up the market....the problem of a prop is it will drop when there is no more propping....lol.....its a fake market...to even use the term MARKET now is a joke....when the market just waits for another QE to make it go up...or a overhyped Facebook....
    26 May 2012, 09:37 AM Reply Like
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