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Friday, November 27 2009 |
12:29 EDT |
DJIA (DIA)
S&P 500 (SPY)
- With tweleve years of stock market profits down the drain, Prozac Nation author Elizabeth Wurtzel wonders why no one is stating the obvious: The whole system is warped. "I would love to call the system despicable or detestable or something evil-sounding, but that would be giving it too much credit. It's really just the march of dunces."
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This news story has 12 comments:
If the market is down, it simply means you haven't bought and held long enough.
Nah, we just havent paid enough taxes yet thats all.
There's plenty of blame to go around for the credit crisis and rapid drop of stock prices world wide. But ultimately it's just you, you sources of income, and your choices about spending versus saving versus investing.
A mammoth financial services industry has mushroomed since the early 1980s. So-called financial advisers make money by selling mutual funds, or bond funds, or collecting various and sundry fees. But it's all about gathering clients (you) and gathering "assests under management" and collecting a percentage.
Though well-intentioned, and well educated in the world of finance, the past two decades lulled many financial advisers and their clients (you) into a false sense of security about the equity markets.
If you look at a one year chart of the Dow Jones Industrial Average you may want to take some of that Prozac you write about. If you look at a ten year chart you may want to double the dose. But if you look at a one hundred year chart you'll see that the stock market has been consolidating gains made between 1982 and 1997 or so.
This period is much like the period between 1966 and 1982. Lots of world changing events, a lot of up and down motion in the stock market, but, overall, the averages didn't increase at all. On an inflation adjusted basis one even lost about 75% of their real purchasing power during this time.
The only way to really make good money in the equity markets during these long side ways movements is to become something of an intermediate term trader, trying to time buying and selling. This is tough to do.
An alternative is to forget about the market, as a whole, and find rapidly growing businesses with a sustainable competitive advantage and terrific management. During the previous lean years of the sixties and seventies one would have made a lot of money in IBM, or Berkshire Hathaway.
But the idea that you can just turn your money over to a "professional" and have that money compound year after year is just an illusion based on the last great bull run that ended about 10 years ago.
There's nothing wrong with cash either.
Extensive research studies by Merrill Lynch and other brokerage firms have proven that, over time, stock prices rise. E.g., if you had bought the Dow in 1932, when it was at 50, and sold it yesterday, you would have realized a gain of approximately 16,000%. That's an annualized return of 200%. You can't argue with mathematics.
And if everyone simply adhered to the buy and hold strategy as they should, the market would rise without the interruption of "corrections" and bear markets. As all buyers hold, and new entrants buy, stock prices would move upward in a linear trajectory.
People like you and Ms. Wurtzel are interfering with the natural ascent of the market.
Once you understand the Ponzi nature of banking and the stock market, it's not so difficult to step out when the shit hits the fan and step back in at the bottom.
On Apr 10 03:17 PM Smegma wrote:
> Jambo and Winston, I don't think you understand fundamental market
> theory.
>
> Extensive research studies by Merrill Lynch and other brokerage firms
> have proven that, over time, stock prices rise. E.g., if you had
> bought the Dow in 1932, when it was at 50, and sold it yesterday,
> you would have realized a gain of approximately 16,000%. That's
> an annualized return of 200%. You can't argue with mathematics.
>
>
> And if everyone simply adhered to the buy and hold strategy as they
> should, the market would rise without the interruption of "corrections"
> and bear markets. As all buyers hold, and new entrants buy, stock
> prices would move upward in a linear trajectory.
>
> People like you and Ms. Wurtzel are interfering with the natural
> ascent of the market.
On Apr 10 03:44 PM css1971 wrote:
> It's a Ponzi scheme. The earlier you get in the better you do. It's
> a fundamental feature of our banking system.
>
> Once you understand the Ponzi nature of banking and the stock market,
> it's not so difficult to step out when the shit hits the fan and
> step back in at the bottom.
>