RobH

Are S&P 500 Earnings Wrong?

I don't think your example using stock prices accurately represents what Siegel is trying to say. A better example would be to suppose that General Motors were to lose a trillion dollars (or some arbitrarily large number). Since GM is only .02% of the S&P index, the loss to the investor would only be .02% no matter how much money GM loses. Due to the limited liability of shareholders, the loss doesn't "transfer" to the other stocks you own -- the most you can lose is 100%.

The total earnings of the S&P companies might be useful as an indicator of overall economic health, but from the perspective of an index fund investor, capitalization-weighte... earnings more accurately represent exactly what it is you're buying.

That being said, I would want to see the historical trend in this metric before using it to conclude that stocks are cheap at current levels.

Move your money from cash into stocks before rigor mortis sets in, big-money fund manager Jeremy Grantham urges. "Typically, those with a lot of cash will miss a very large chunk of the market recovery."

Based on the number of people on the Internet claiming to have sold in the fall of 2007, it's amazing that the market didn't crash back then.

Supress the urge to bottom fish: "Rallies led by financials... are suspect by definition."

Kudos to the author for pointing out that the bears' calls for a sub-600 S&P are no less speculative than the calls of a bottom. The difference is that the bottom-callers are mocked relentlessly (and rightfully so), while the bears are generally given a free pass.

Stock Mutual Funds Investors' Sorry Returns

You seem to have gotten it exactly backwards. Passive indexing is based on the idea that few people consistently earn above average returns. As the article shows, investors in passive index funds did a whole lot better than the average investor over the past 20 years.

On Jun 10 01:55 PM Dave Shafer wrote:

> Try pointing this out to the passive index fund investors and see
> what you get as a response! In their world, everyone gets above
> average returns! They think that the hypothetical returns of their
> portfolio's are the real returns!

'Don't Fight the Fed' ETFs: Time to Reconsider Mortgage Debt Investments?

MBB has a duration of 1.43 years compared to 15.19 years for TLT. Thus TLT has a much greater exposure to the risk of rising interest rates. (And I wouldn't count on the Fed to save you by keeping rates down, as they seem to be concentrated in the 2-to-10 year sector. After all, they realize that the government borrowing money at 3% for 30 years is a steal and don't want to put a stop to it.)

On Mar 22 11:15 AM F. Bradeen wrote:

> Not that I am interested in either one, but an investor can get a
> 3.3% yield from TLT (30 year treasuries). Why bother with MBB with
> obviously higher risk? What am I missing?

Wednesday Outlook: Commodities, Emerging Markets

JasonC,

I have been following your comments with a great deal of interest, and I feel compelled to delurk to ask you the following: if we are indeed in a period of deflation, why are you long stocks as you have stated in other posts? Wouldn't it be preferable to go 100% into investment grade credits, since they represent claims on nominal dollars? (Note that I'm not disagreeing with your thesis per se, but I'm just puzzled by the apparent contradiction.)