^ I don't think so either, but he asked...

11/11/2008 12:48:10 AM

Quote :

"Such a system suffers the same problem as SS. Where is that 3% return coming from? As it is a government program, I suspect future annuity payments will come out of the tax rolls of the present. As such, the system will fail as the population continues to age, just like SS, will it not?"

I don't think so. My understanding is that payments into the system will be invested much like the Thrift Savings Plan for government employees is now. Payouts should come from investment gains.

11/11/2008 6:44:09 AM

and is that investment gain based on what, where do you get the 3% from, market investing ?

or a giant government run pyramid scheme (SS) again ?

11/11/2008 9:44:00 AM

^^ Then what is the difference between the government doing it and you investing your money for yourself? In both instances it winds up put into bond and equity markets, where it will be wipped out in a great calamity. The difference being that until the day of reconning you will earn a return far in excess of 3%.

[Edited on November 11, 2008 at 10:19 AM. Reason : .,.]

11/11/2008 10:17:39 AM

Both of your questions are answered in the proposal.

11/11/2008 5:47:40 PM

Quote :

"Then, when you consider the past 13 years, the market has broken rank with its traditional and predictable rate of return over time, you have to wonder just how safe is our stock market."

How prescient of myself. Buy and hold is dead

http://www.cnbc.com/id/27651174

11/11/2008 9:00:29 PM

Why is buy and hold dead? Share prices have always recovered post recession and all the while you get to pocket the dividends even if you never sell. When all is included the stock market has still never been beat in terms of annualized return, or do you know something I don't?

11/11/2008 9:45:00 PM

March 13, 1998 -> Dow = 8602
Aug 23, 2002 -> Dow = 8872
Nov 11, 2008 -> Dow = 8693


No, the markets do not always recover.

11/11/2008 9:56:34 PM

If you just compare the index numbers are you not ignoring the 10 years of stock dividends you have received?

Similarly, are we not likely to be at a minimum just a few weeks ago?

[Edited on November 11, 2008 at 10:35 PM. Reason : .,.]

11/11/2008 10:33:43 PM

If you had 500k to invest in Coke in June 2001, you wouldn't be able to eat for the year off the dividends you get and you would have nothing to show for having your money sit with them for over 7 years. Buy and hold!

11/11/2008 11:06:08 PM

So your big revelation is that if you buy stock during an economic slump, and then try and sell it during another economic slump you won't make much money if any? No shit.

How does this show that buy and hold is dead?

Incidentally, as LS points out, your completely ignoring dividends, which on your roughly 11,000 shares you bought in June of 01 would have earned you about $80k

[Edited on November 12, 2008 at 11:03 AM. Reason : sg]

11/12/2008 10:56:39 AM

Quote :

"So your big revelation is that if you buy stock during an economic slump, and then try and sell it during another economic slump you won't make much money if any? No shit."

The economy was slumping in 1998?

Quote :

"Incidentally, as LS points out, your completely ignoring dividends, which on your roughly 11,000 shares you bought in June of 01 would have earned you about $80k"

Can you read:

Quote :

"you wouldn't be able to eat for the year off the dividends you get "

Quote :

"How does this show that buy and hold is dead?"

The 80s-90s was an era of unprecedented industrial expansion and efficiency improvements thanks in large part to computers. Then we had the tech boom which brought communications and information sharing into the 21st century. The past 10 years since them has seen the rise of the shadow banking industry and fake bubble created wealth. Scores of MBA students and who knows how many works hours have been poured into an industry that hasn't created anything of material wealth. If the economy doesn't go back to one that actually produces stuff that is real, then there isn't anything in our near future that will see that sweet sweet 7.5% historic gain that we all know and love.

11/12/2008 11:40:52 AM

Quote :

"The economy was slumping in 1998? "

I'm sorry, I didn't realize buying in 2001 meant in reality buying in 1998, I was confused with that whole concept of linear time.

Quote :

"you wouldn't be able to eat for the year off the dividends you get "

In the first year, you would have gained ~9k in dividends had you bought in June of 01, after the june dividend payment. If you can't eat on 9k a year, you've got big problems.

Quote :

"The past 10 years since them has seen the rise of the shadow banking industry and fake bubble created wealth. Scores of MBA students and who knows how many works hours have been poured into an industry that hasn't created anything of material wealth. If the economy doesn't go back to one that actually produces stuff that is real, then there isn't anything in our near future that will see that sweet sweet 7.5% historic gain that we all know and love."

Big deal, so one sector of the market dies, and all those people will find something else to do. I'm still not seeing how buy and hold is a dead idea.

11/12/2008 11:56:49 AM

^
I agree, buy and hold is not a dead idea.

Next couple of years are going to be worse than the last, no matter who is president. Now even more companies are jumping on the bailout bandwagon (AMEX released today) meaning more money being sucked out of taxpayers. So no matter how you are doing it, just be smart about your investments and save

11/12/2008 12:09:50 PM

Quote :

"I'm sorry, I didn't realize buying in 2001 meant in reality buying in 1998"

Please read the thread, not just the last post.

Quote :

"March 13, 1998 -> Dow = 8602 Aug 23, 2002 -> Dow = 8872 Nov 11, 2008 -> Dow = 8693"

But I guess you have a point. As far as investments were concerned, 1998 is the same as 2001 is the same as 2008.

Quote :

"In the first year, you would have gained ~9k in dividends had you bought in June of 01, after the june dividend payment. If you can't eat on 9k a year, you've got big problems."

Somehow, I can imagine someone with 500 large to invest is spending more than 24 bones a day to feed two people.

Quote :

"Big deal, so one sector of the market dies, and all those people will find something else to do. I'm still not seeing how buy and hold is a dead idea."

Yup, they'll jump into the next asset bubble and we'll be here in another 10 years talking about Dow 8000 again.

11/12/2008 1:14:37 PM

Quote :

"But I guess you have a point. As far as investments were concerned, 1998 is the same as 2001 is the same as 2008. "

Depends on your choice of investment. For instance, had you bought 500k worth of Apple stock in sept of 1998 (or for that matter in 2001), you would have bought ~53,191 shares. Not counting the two 2:1 splits since then, your initial shares would be worth ~$4,884,042 today.

Quote :

"Somehow, I can imagine someone with 500 large to invest is spending more than 24 bones a day to feed two people. "

Somehow I can't imagine someone with 500K to invest in a single company who's spending more than $24 a day to feed two people being particularly harmed by this current economic slump, nor trying to figure out how they're going to feed their family on their dividend returns.


[Edited on November 12, 2008 at 1:39 PM. Reason : asdfadsfa]

11/12/2008 1:34:06 PM

Quote :

"Depends on your choice of investment. For instance, had you bought 500k worth of Apple stock in sept of 1998 (or for that matter in 2001), you would have bought ~53,191 shares. Not counting the two 2:1 splits since then, your initial shares would be worth ~$4,884,042 today."

Come on man, I know there is a better stock out there that returned more than Apple. Wouldn't that have been better for your cade?

I was wondering when someone was going to stumble onto this line of reasoning. This idea of government 401k or whatever you want to call it is exactly for the unsophisticated investor. The ones that were told to just put their money in the market and they'll be fine. Buy and hold. Folks like my 50 yr old father that finally decided to crawl out from under the safety of savings accounts and into the market with his 401k in the 1999 time frame. For years he'd been hearing talk from uncles and talking heads on TV about the great returns and your money should be in the market and if it goes down it will go back up again, no worries, only to see his timing royally suck and have his hard earned savings take a nice whack to the face.

Look, I'm not saying it's for everyone, it certainly isn't for those of us that would rather play the market, you know, the opposite of "buy and hold", the very point I've been trying to make and you're making indirectly though you don't even realize it. But I can imagine there are many people out there that have seen their pensions whacked that thought they were safe that would be jumping all over some form of investment that really does straddle the a better line between safety and risk, away from the stock market.

Quote :

"Somehow I can't imagine someone with 500K to invest in a single company who's spending more than $24 a day to feed two people being particularly harmed by this current economic slump, nor trying to figure out how they're going to feed their family on their dividend returns."

Way to take a half hearted nearly pointless example and really try and run with it. Single company or diversified, buy and hold starting in 1998 has whacked every sector. I'm interested to see why you think buy and hold is not dead. What economic future do you see for the US?

11/12/2008 1:48:23 PM

Quote :

"Look, I'm not saying it's for everyone, it certainly isn't for those of us that would rather play the market, you know, the opposite of "buy and hold""

What makes you think you are smarter than all the people that work in wall-street for a living? If buying a group of stocks will have a higher return than another group of stocks (say an index fund of stocks) then the professional individuals that make up wallstreet can sell (or short) the losers and buy your winners, driving up the return of the losers and down the return of your winners until they are equal. As such, unless you are actually smarter than these professionals (such as insider information) then we must conclude that your return will roughly match all other returns. The only difference being, of course, that the rest of us (buy and hold) avoided the fees and efforts that you had to invest.

Quote :

"What economic future do you see for the US?"

The same economic future it has ever had: the US enjoys a stable political regime, low regime uncertainty, free labor markets, and somewhat free goods and capital markets. As such, for as long as I can figure there will be profits to claim and those profits will be claimed by share holders.

I must ask, why do you ask? What do you think has changed that means our economic future will no longer resemble our economic past?

11/12/2008 2:17:56 PM

Quote :

"Folks like my 50 yr old father that finally decided to crawl out from under the safety of savings accounts and into the market with his 401k in the 1999 time frame. For years he'd been hearing talk from uncles and talking heads on TV about the great returns and your money should be in the market and if it goes down it will go back up again, no worries, only to see his timing royally suck and have his hard earned savings take a nice whack to the face."

Your 50 year old father broke the first rule of investing. The closer you are to retirement, the more you should invest in safe investments with low, but nearly guaranteed rates of return. Hell there's practically no way in hell he could have gotten into investing his money without seeing that warning at least once. At 50, very few of his savings investments should have gone into the stock market. So, sorry for your dad, but it isn't like he wasn't warned.

Quote :

"But I can imagine there are many people out there that have seen their pensions whacked that thought they were safe that would be jumping all over some form of investment that really does straddle the a better line between safety and risk, away from the stock market. "

The problem is, those investments already exist. They've existed for YEARS. The fact of the matter is none of these people you're imagining actually thought about what they were doing and were greedy. They didn't want the safe returns of bonds and CDs, they wanted more and bigger returns. Well, the laws of the stock market will not be denied, and bigger returns carry bigger risks. You don't need a new mandatory government program for people to have safe investments, you just need people to actually read the warnings that are plastered all over every brokerage, 401k, and investment site, book and prospectus. If they fail to do that, their losses are their own fault.

Quote :

"Way to take a half hearted nearly pointless example and really try and run with it. Single company or diversified, buy and hold starting in 1998 has whacked every sector. "

Except it hasn't, and thats the point. You ignore dividends, you ignore other companies that have done well, despite the current downturn. The entire market is not made of the housing and banking industries.

From 1998, pepsi is up $20 per share and paid dividends.
Toyota up $10 per share + dividends.
Microsoft is only down $2 per share, and has spilt twice and paid dividends.
Lockheed Martin is up $25 per share + dividends
McDonalds is up $20 per share + dividends
SYSCO is up $10 per share + a split and dividends
We've already been over Apple
Kraft is only down $2 and has paid dividends
Wal-Mart is up $20 + split and dividends
Target is up $10 + split and dividends
Johnson and Johnson up $18 + split and dividends
Exxon is up $35 per share + split and dividends

All of these are solid excellent companies and were solid companies in 1998 (ok, Apple wasn't so solid). All of them have made decent returns given the market took 3 hits in the last 10 years and with dividends have made nice investments for folks, especially when you consider that the end numbers are todays numbers, in the middle of a downturn. Buy and hold isn't dead, you just need to buy and hold companies that are buy and hold stocks.

11/12/2008 2:23:35 PM

Quote :

"Your 50 year old father broke the first rule of investing. The closer you are to retirement, the more you should invest in safe investments with low, but nearly guaranteed rates of return. Hell there's practically no way in hell he could have gotten into investing his money without seeing that warning at least once. At 50, very few of his savings investments should have gone into the stock market. So, sorry for your dad, but it isn't like he wasn't warned."

that's some sanctimonious bullshit. For decades bankers and investors have been espousing wisdom like "the market is never negative over 10 year periods", "diversify between large cap, small cap, and foreign, and you will always make money over 5-10 year periods". But when people decide to dive into the market, and voilà, 10 years later they have less money than before, the investors will say "well, i mean, come on - we told you to be careful! You were 50 years old! you're practically dead, old man! WTF were you thinking trying to play the stock market!"

11/12/2008 3:00:25 PM

There are many resources that provide a breakdown of 401(k) investment strategies based on your age, desired income on retirement, retirement age, etc.

http://www.401khelpcenter.com/mpower/feature_091200.html

Also, it appears to be true that over time the stock market has returned positive earnings. There may be instances where a 10 year period returned minor loses, but for the most part it has seen much higher positive gains.

 	Price Change Dividend Dist. Rate Total Return Inflation Real Price Change Real Total Return
1950s	13.2%	5.4%	19.3%	2.2%	10.7%	16.7%
1960s	4.4%	3.3%	7.8%	2.5%	1.8%	5.2%
1970s	1.6%	4.3%	5.8%	7.4%	-5.4%	-1.4%
1980s	12.6%	4.6%	17.3%	5.1%	7.1%	11.6%
1990s	15.3%	2.7%	18.1%	2.9%	12.0%	14.7%
2000-2007	0.0%	1.7%	1.4%	2.8%	-2.7%	-1.4%
1950-2007	7.9%	3.7%	11.8%	3.8%	4.0%	7.6%

11/12/2008 3:14:54 PM

Quote :

"Buy and hold isn't dead, you just need to buy and hold companies that are buy and hold stocks."

If I wanted to waste as much time as you did, I'd go dig up some other large cap stocks that haven't fared so well. Oh wait, I can do it without wasting all that time, here is the link

http://finance.google.com/finance?q=INDEXDJX%3A.DJI

Or, we can be a little more specific and talk about

Alcoa, down 36%
Wachovia, down 90%
Altria, down 55%
Disney, down 46%
HP, break even

Quote :

"Your 50 year old father broke the first rule of investing. The closer you are to retirement, the more you should invest in safe investments with low, but nearly guaranteed rates of return. Hell there's practically no way in hell he could have gotten into investing his money without seeing that warning at least once. At 50, very few of his savings investments should have gone into the stock market. So, sorry for your dad, but it isn't like he wasn't warned."

This might be a little bit of a surprise to you in the bubble you live in, but not every American came out of college with a BS degree and a 40 year plan. It took my folks a full 15-20 years before they had any money to invest at all. And 50 isn't close at all to retirement. agentlion already touched on it, but what exactly was "risky" about investing in basic mutual funds that were tied directly to the US economy that forever had returned 7.5%? Oh wait, you're right, now that the US economy has gone to bubble inflation wealth creation rather than good ole manufacturing, we should be wary of it. Wish we would have all known that then.

Quote :

"The problem is, those investments already exist. They've existed for YEARS. The fact of the matter is none of these people you're imagining actually thought about what they were doing and were greedy. They didn't want the safe returns of bonds and CDs, they wanted more and bigger returns. Well, the laws of the stock market will not be denied, and bigger returns carry bigger risks. You don't need a new mandatory government program for people to have safe investments, you just need people to actually read the warnings that are plastered all over every brokerage, 401k, and investment site, book and prospectus. If they fail to do that, their losses are their own fault."

Stop talking out both sides of your mouth. Investing in the US economy (and I use the term loosely to mean the Dow, or something of an equivalent) can't be risky and not risky at the same time. There was nothing greedy about it.

Quote :

"What makes you think you are smarter than all the people that work in wall-street for a living?"

Same reason you think you have all the answers to any economic related threads in this section I suppose? But seriously, that statement doesn't make any sense at all, especially when we consider how smart are the folks that have been saying the market and economy was sound since the beginning of this year. Some folks were brilliant and some were goats.

Quote :

"If buying a group of stocks will have a higher return than another group of stocks (say an index fund of stocks) then the professional individuals that make up wallstreet can sell (or short) the losers and buy your winners, driving up the return of the losers and down the return of your winners until they are equal. As such, unless you are actually smarter than these professionals (such as insider information) then we must conclude that your return will roughly match all other returns."

What? Are the professionals buying or selling the losers? Why would them buying my winners drive up the returns of the losers? I think you just misspoke.

Quote :

"As such, unless you are actually smarter than these professionals (such as insider information) then we must conclude that your return will roughly match all other returns. The only difference being, of course, that the rest of us (buy and hold) avoided the fees and efforts that you had to invest."

You do this a lot. Lot of nice what if scenarios that sound good on paper but just don't make sense. See my previous statement, but not everyone on Wall Street has lost out this year. I'm not even going to pretend that I would have been in that crowd. It's entirely likely that as a non buy and holder I would be worse off, but that wasn't the point of the statement, the point was, going forward you'll be a buy and holder and have nothing to show for your efforts.

1980s	12.6%	4.6%	17.3%	5.1%	7.1%	11.6%
1990s	15.3%	2.7%	18.1%	2.9%	12.0%	14.7%
2000-2007	0.0%	1.7%	1.4%	2.8%	-2.7%	-1.4%

11/12/2008 3:34:48 PM

Quote :

"This might be a little bit of a surprise to you in the bubble you live in, but not every American came out of college with a BS degree and a 40 year plan. It took my folks a full 15-20 years before they had any money to invest at all."

Bullshit. I knew way before I had a degree that you don't risk what you can't afford to lose. I also knew some of the basics of financial planning, such as the risk early/avoid risk late idea. it's just common sense.

And this may come as a shock to you, but pretty much everyone who isn't a complete financial idiot can afford to sock away something in a retirement account. Coming out at 50 and putting money into the stock market is asinine, and every one knows that. you mentioned that your poor old dad was finally convinced to pull his money from savings accounts and put them in mutual funds... Guess what, sounds like he had money saved up, shocker! So your sob story about "not having money to invest" is bullshit anyway. They had money to invest, they were just complete idiots about it. The only thing they could have done that would have been worse would have been to shove that money under a mattress.

And, what part of diversification doesn't make sense to you? We've already showed you examples of companies that have made a bloody killing since 1998, and you continue to go on this "ooooooooh, it's all terrible!!!" rant. Guess what, if you were invested totally in one of the companies that went belly up, then yeah, you lost your shirt. You were also an idiot. But, if you were invested partially in some companies that went belly up and some companies that did ok and some companies that did pretty well, then you still came out ahead, despite the dow-average looking almost the same over that 10-year period. What you are failing to see is that the dow-average isn't the end-all metric of stock performance.

11/12/2008 8:19:53 PM

Quote :

"If I wanted to waste as much time as you did, I'd go dig up some other large cap stocks that haven't fared so well. Oh wait, I can do it without wasting all that time, here is the link "

Your point was that everyone's investments across all sectors have been hammered and buy and hold has lost people money, not that some companies aren't doing well.

And even some of your companies that are down have still returned money.

Alcoa split twice and paid dividends every quarter.

If you spent your 500K on them in 98, you would have had 25k shares. Two 2:1 splits gives you 100k shares, valued today, even down 36% at a little over $1M. On dividends alone since 200 that's another 15K. Meaning if you sold today, and never reinvested your dividends, you would have ~$1.05M Not bad for buy and hold thats been through 2 down turns and is in the middle of another.

Look, I'm not saying that people haven't lost money in this, I know I have. But just because people are losing money in the short term doesn't mean buy and hold for the long term is dead.

Quote :

"This might be a little bit of a surprise to you in the bubble you live in, but not every American came out of college with a BS degree and a 40 year plan. It took my folks a full 15-20 years before they had any money to invest at all. And 50 isn't close at all to retirement. agentlion already touched on it, but what exactly was "risky" about investing in basic mutual funds that were tied directly to the US economy that forever had returned 7.5%? Oh wait, you're right, now that the US economy has gone to bubble inflation wealth creation rather than good ole manufacturing, we should be wary of it. Wish we would have all known that then."

Neither did I, but it doesn't take a college education to read plain english, hell, if my grandmother in the 60's could learn how to invest and diversify, your parents should have been able to pick up a book or two. Every investment book, site and prospectus tells you 2 things before anything else: 1)If you're close to retirement or don't want to lose principal don't invest heavily in stocks. 2) The better the possible returns, the greater the possible loss.

As far as 50 not being close to retirement age, it's certainly close enough that a large amount of your parents investments should have been in something other than stocks. On the other hand, if they aren't close to retirement, then as long as they keep holding, when the market rebounds, they'll make their money back and then some.

As for the risk of mutual funds, if they're still made up of stocks, you're still investing in a higher risk investment.

Quote :

"Stop talking out both sides of your mouth. Investing in the US economy (and I use the term loosely to mean the Dow, or something of an equivalent) can't be risky and not risky at the same time. There was nothing greedy about it."

I didn't say it was risky and not risky. I said there are safer investments. Stocks cary risks. Stocks with high chances of return, carry higher chances of risk. Bond and CDs carry lower risks, but also lower returns. Yes, the economy returned over a long time 7.5%, which is higher than Bonds and CDs return, but that 7.5 is a combination of massive highs and horrible lows, if you need the money in the short term (and realistically, 5-10 years is short term) then the risk is much higher.

Quote :

"what is there about the economy that would make you feel comfortable with buy and hold?"

The fact that we haven't yet socialized our economy.

11/12/2008 8:56:18 PM

Quote :

"If you spent your 500K on them in 98, you would have had 25k shares. Two 2:1 splits gives you 100k shares, valued today, even down 36% at a little over $1M."

Gonna give you a chance to fix this before I read anything else you posted.

11/12/2008 10:13:39 PM

Quote :

"I think you see right here in the numbers the reasoning behind the buy and hold is dead logic. As I already stated, the 80s were an era of unprecedented industrial growth, thanks to the computer. The 90s, thank you to the rise in tech and communications. Then look what happened. Going forward, sans some sort of new energy revolution and rapid innovation in this area (seems the most logical area, maybe there is something else?) what is there about the economy that would make you feel comfortable with buy and hold?"

I'm not sure I follow this part. Are you saying that you don't think there will be any other innovations and booms that help the stock market out in the future? Just because there hasn't been one during the 00's doesn't mean there won't be in the future. The 70's had the same return (-1.4%) and then the 80s bounced back and the 90s went even further up. Who's to say that won't happen in the 10s and 20s?

11/13/2008 9:36:31 AM

Quote :

"Gonna give you a chance to fix this before I read anything else you posted."

I suppose if I'm going to be using split adjusted prices, I should account for that through the entire set of calculations shouldn't I?

Sort of takes the wind out of my sails on that one.

Mea culpa.

Carry on.

11/13/2008 3:57:35 PM

HEY GUISE

I JUST HERD OBAMA IS GOING TO TAKE MY GRANDMA'S PENSION AND GIVE IT TO LAQUISHA AND TYRELL SO THEY CAN PUT SPINNERS ON THEIR CADDY RIMS

IS IT TRUE????

11/13/2008 4:41:17 PM

Quote :

"you and the Democrats (ok not all of them) on this board blindly defend anything Obama does without even listening to debate or another point of view"

Quote :

"to be fair, Obama has not publicly supported such a plan but these are the ideas being floated by the far left"

Quote :

"Anybody with a different opinion than yours is apparently a partisan hack."

:carlface:

11/13/2008 10:48:39 PM

Quote :

"What? Are the professionals buying or selling the losers? Why would them buying my winners drive up the returns of the losers? I think you just misspoke."

When someone decides to buy a stock they must convince the holders of that stock to sell. That is usually done by bidding $Z higher for the stock today so that the expected future return from today onwards is low enough that they choose to sell today. So, if I am a professional with a large volume of liquid assets available and I believe stock Y will have above market returns in the future then I will liquidate other assets to buy stock Y, driving up the price of stock Y today and therefore eliminating stock Y's above market returns into the future. Instead of a price of $X today and a price of $M in ten years with an above market return, it will now sell for a price of $X+$Z today and a price of $M in ten years with an average market return.

So, again, what makes you think you will figure out what stock Y will be worth in ten years and that the current price represents an above market return before the army of professional traders enhabiting New York does? If you figure it out after them then it will do you no good, as you will be buying the stock at a price of $X+$Z, which is only an average market return. What there is no doubt of is the fact that you will pay more in brokerage fees than we do to our index funds for almost exactly the same return.

And now that we have more data, you have your evidence: a negative return in the 70s followed by substantial returns in the 80s and 90s. Well, now we are in the 70s again in terms of the stock market. This is where the risk comes from: you are not allowed to invest for only 10 years if you invested in the late 90s, you must invest for 20 years to eek out a good return. But that is not really risk: most investment advice I've seen assumes you will need to leave any stock investments alone for 20 years before using it, and if you did assume this then even the great depression was not a total loss.

Quote :

"As I already stated, the 80s were an era of unprecedented industrial growth, thanks to the computer. The 90s, thank you to the rise in tech and communications. Then look what happened. Going forward, sans some sort of new energy revolution and rapid innovation in this area (seems the most logical area, maybe there is something else?) what is there about the economy that would make you feel comfortable with buy and hold?"

If I knew then I would be stupid to invest my money in the stock market; I should instead start my own company engaging in the new coming revolution. However, I have no firm idea what the engine of growth will be in the next 20 years, as such the stock market is where I put my money.

Similarly, you are wrong about the origin of profits. Even if there was never another invention in human history companies will still earn profits which will be claimed by shareholders. Historically, it is rare for the investors of new technology to win out. Initial investors in the first large-scale railroad in human history (GWR) barely made a 5% return, the investors in the next few large rail roads to come online lost their shirts. Think about all those investors that jumped into internet stocks: only a tiny percentage of the investors in that game won out. It is only after the uncertainty of the revolution has passed that consistent returns develop. As such, unless you are confident in your ability to pick out the Google or Amazon every-time, in the name of all our stock portfolios, please stop praying for another technological revolution. Our retirement accounts cannot take it.

[Edited on November 14, 2008 at 9:04 AM. Reason : .,.]

11/14/2008 9:00:05 AM

On Buy and Hold:

While I don't know of any strategy that is clearly superior to buy and holding equities over the long-run, with the possible exception of a well executed Dow Theory Model, it is also a mistake to whistle past the graveyard thinking that equities always go up.

There are certainly long periods of stagnation in the US market



Over that period equities pay dividends, however, they also experience inflation. If the dividend rate doesn't beat inflation then you are losing money directly.

More importantly, however, money has opportunity costs and if you are taking 3% dividends and experiencing 2% inflation you get a real rate of return of 1% Even durable consumption might give you a better return than that.

And still we have to remember that equities don't always recover in anything approaching a reasonable time frame. See Nikkei:



We are actually even lower on the Nikkei now. 8462 after a 200 point rally last night.


And while we are obviously only a few years into it and it represents a sub-set of the larger market, the NASDAQ seems to be painting a similar picture:

11/14/2008 10:12:49 AM

Quote :

"When someone decides to buy a stock they must convince the holders of that stock to sell. That is usually done by bidding $Z higher for the stock today so that the expected future return from today onwards is low enough that they choose to sell today. So, if I am a professional with a large volume of liquid assets available and I believe stock Y will have above market returns in the future then I will liquidate other assets to buy stock Y, driving up the price of stock Y today and therefore eliminating stock Y's above market returns into the future. Instead of a price of $X today and a price of $M in ten years with an above market return, it will now sell for a price of $X+$Z today and a price of $M in ten years with an average market return."

*** scratches head *** Ummm, what? That didn't at all address my question about this

Quote :

"If buying a group of stocks will have a higher return than another group of stocks (say an index fund of stocks) then the professional individuals that make up wallstreet can sell (or short) the losers and buy your winners, driving up the return of the losers and down the return of your winners until they are equal."

How does buying winners drive up the return of sold losers?

Regardless of whatever crazy single variable scenario you concoct to try and make a point, let's go back to where we started to which you didn't address, which is this:

Quote :

"What makes you think you are smarter than all the people that work in wall-street for a living?"

I'm not sure you got this point the first time I made it. Clearly, not every professional on Wall Street is "smart". There were big time winners and losers over the past year. There were many folks that broke even. Add to that, thanks to the interweb, millions of other folks are now voting on the price of stocks from the comfort of their home office. Hell, there are folks on this very web site that I suspect are returning positive gains or maybe break even gains during this slump. What do you say to them? Clearly, they didn't get there by buying and holding. Their current performance doesn't predict their future returns, but their future looks a lot brighter than the people that rode this market down from buy and hold.

11/14/2008 12:22:54 PM

President-elect Barack Obama has announced plans for a presidential YouTube channel
- http://www.pcworld.com/article/153934/obama_gets_geeky_with_youtube_channel_and_net_background_checks.html

This is a great move, I think.

[Edited on November 14, 2008 at 8:07 PM. Reason : ]

11/14/2008 8:06:55 PM

Quote :

"*** scratches head *** Ummm, what? That didn't at all address my question about this"

If you can't figure it out, then you shouldn't be posting...

11/14/2008 8:36:08 PM

Quote :

"How does buying winners drive up the return of sold losers?"

The underlying assumption is that the value of a stock comes from its stream of profits.

So suppose that both Stock A and Stock B are priced at $100 a share, companies are expected to earn $4 per share in profits each year. However, in a surprise Stock A reports $5 per share in profits while stock B only reports $2 per share in profits.

Now if growth rates are consistent going foward Stock A should rise in price to $125 a share and Stock B should fall to $50 per share. So Stock A is a winner and Stock B is a loser.

However, at this point a new investor has to pay $25 for every dollar in profit if he invests in stock A and $25 per every dollar in profit if he invests in Stock B. So, the expected return from each stock is now equilibrated.

From this example, one should see that the very act of a Stock "winning" drives down the expected future return. And, the very act of a Stock "loosing" drives up the expected return.

That having been said, for reasons no one completely understands some evidence suggests that there may be serial correlation in stock price movements. That is they are not a complete random walk. Stocks that are going up do seem to have a tendency to keep going up and stocks that are going down do seem to have a tendency to go down. That is there are trends.

I should note that the existence of trends is controversial, but the empirical evidence seems to suggest to me that there are trends.

11/15/2008 1:32:14 AM

http://www.youtube.com/watch?v=Zd8f9Zqap6U

The first weekly presidential YouTube address.

He doesn't talk about seizing any retirement accounts, but he does push for a bailout.

11/15/2008 2:30:04 PM

Quote :

""well, i mean, come on - we told you to be careful! You were 50 years old! you're practically dead, old man! WTF were you thinking trying to play the stock market!""

To be fair, none of those people were suggesting that a 50 year old go all-in on stocks like a 20-something.

Quote :

"This might be a little bit of a surprise to you in the bubble you live in, but not every American came out of college with a BS degree and a 40 year plan. It took my folks a full 15-20 years before they had any money to invest at all. And 50 isn't close at all to retirement. "

Look, I don't know your folks, so you might be right, but find it very hard to believe. Almost everyone can afford to invest. Sounds like your folks probably were living beyond their means just like almost everyone else in America. That isn't to say that they were living the high life--buy I have a pretty good idea that they fell into the "spend first, save what's left" camp with 95% of the rest of the population. Guess what? There wasn't anything left. Well, no shit--I could've told you that. If you are serious about accumulating wealth (in whatever amount you set as a goal), first of all, you should have a clear goal. Second, you should treat it just like a bill--it must be payed along with the groceries and the power bill before you go out to eat or buy a car (beyond minimal transportation).

I have junior enlisted Marines in my squadron who invest hundreds of dollars per month on a ~20k/year salary (though they live in the barracks, so let's say 25k/year).

Seriously...think about how little it takes to find an "extra" $200/month.


Finally, 50 is WAY close to retirement to be 100% invested in stocks. Shit, I'm on the aggressive side for being 100% into stocks at 29 (though I think it's totally justified at my age).

Quote :

"Stop talking out both sides of your mouth. Investing in the US economy (and I use the term loosely to mean the Dow, or something of an equivalent) can't be risky and not risky at the same time. There was nothing greedy about it. "

No, no, no...what he meant was that it's risky to be 100% invested in stocks, even though that historically destroys everything else in terms of ROI. It's even riskier to be all into stocks from one country, even if it is the U.S. You can mitigate the risk by investing in bonds, cash, bonds, REITs, bonds, etc. There are even prepackaged investments all over the place to make this a simple, idiot-proof one-stop-shopping affair. If you get burned, it's because you are either greedy or ignorant, or both.

Quote :

"Look, I'm not saying that people haven't lost money in this, I know I have."

Not if you don't realize the losses!

(sort of)

11/15/2008 5:37:18 PM

Unless you panic and sell when it hits a low you haven't actually lost any money. Hang onto your investments, don't panic and ride this shit out.

11/15/2008 8:46:06 PM

Quote :

"Look, I don't know your folks, so you might be right, but find it very hard to believe. Almost everyone can afford to invest. Sounds like your folks probably were living beyond their means just like almost everyone else in America."

Unreal. You're right, you don't know my folks, you really have no idea what you're talking about. But it's a crappy ole message board on the internet, so I guess I shouldn't be surprised some anonymous dick thinks they know more about my own family history than I do.

Quote :

" No, no, no...what he meant was that it's risky to be 100% invested in stocks, even though that historically destroys everything else in terms of ROI."

"No no no, he wasn't talking out both sides of his mouth, and I'm not about to either - stocks have the best return on investment...but they're risky" Really? If they have the best ROI, then why are they risky? Let's be honest, from the 50s up to now, even with a sad 10 year period during the 70s, stocks were wonderful for buy and hold. Literally, awesome. But that time period is dead. Buy and hold is dead. The past 7-10 years have been a sham. We've educated a generation of bright kids at the best business schools in the country to...create nothing of material wealth. Literally nothing.

Quote :

"It's even riskier to be all into stocks from one country, even if it is the U.S. "

Where did you pick up this little nugget of advice? Maybe once the emerging economies have fully broken away from the US, they'll be decoupled from us, but for the time being forget about it. We sneeze, they catch the cold. The S&P 500 is down 40% YTD, the MSCI Emerging Markets is down 55% this year. Japan, who seems to be coming through this with the least damage is still down 35%. Of the 5-8 countries I glanced at from this list
http://finance.google.com/finance?q=MSCI
they are all down 50% or more, worse than our own S&P. Are you saying my dad should been have diversified into other countries with worse returns?

Quote :

"There are even prepackaged investments all over the place to make this a simple, idiot-proof one-stop-shopping affair. If you get burned, it's because you are either greedy or ignorant, or both. "

Or, maybe if you aren't born with shit to your name, and you've never had shit to your name, then when you finally have something worth investing, it doesn't automatically mean you know what to do with your money. And financial planners aren't exactly a dime a dozen in small town America.

I really get irked by all the silver spooners and the college educated people on this board that grew up with this knowledge and these advantages assuming the shit is just second nature to everyone when it just isn't at all. Most of the folks here generally don't have a clue what the real world is to everyone else that isn't in the college degree got the world on their plate crowd.

11/15/2008 10:46:34 PM

Quote :

"But that time period is dead. Buy and hold is dead. The past 7-10 years have been a sham. We've educated a generation of bright kids at the best business schools in the country to...create nothing of material wealth. Literally nothing."

Because you say so and are incapable of disputing others when they demonstrate your lack of comprehension. But that's ok, the rest of us are inauthentic Richie Riches just because we have library cards and therefore don't deserve to be talked to as fellow human beings.

11/15/2008 11:18:15 PM

Quote :

"f they have the best ROI, then why are they risky? Let's be honest, from the 50s up to now, even with a sad 10 year period during the 70s, stocks were wonderful for buy and hold. Literally, awesome. But that time period is dead. Buy and hold is dead. The past 7-10 years have been a sham.We've educated a generation of bright kids at the best business schools in the country to...create nothing of material wealth. Literally nothing"

Because bigger ROIs require bigger risk. Period. Thats why you get such huge ROIs, to entice you to play the risk.

But also, you're being incredibly short sighted. Buy and hold does not mean 7-10 years. As far as the economy and the stock market is concerned, that is an extremely short amount of time. Buy and hold is 30+ years, and over that time, the stock market kills in ROI. You can't declare buy and hold dead, when you haven't held.

Quote :

"Or, maybe if you aren't born with shit to your name, and you've never had shit to your name, then when you finally have something worth investing, it doesn't automatically mean you know what to do with your money. And financial planners aren't exactly a dime a dozen in small town America."

Nor were financial planners a dime a dozen for secretaries in the 1960's but that didn't stop my grandmother from teaching herself the stock market and investing and diversifying enough that what she left behind when she died has provided for a great portion of my grandfather's medical expenses and living expenses. And that was after she sent 5 kids to college on her dime. My anecdote > your anecdote.

Quote :

"I really get irked by all the silver spooners and the college educated people on this board that grew up with this knowledge and these advantages assuming the shit is just second nature to everyone when it just isn't at all. Most of the folks here generally don't have a clue what the real world is to everyone else that isn't in the college degree got the world on their plate crowd."

Oh yeah, real silver spooners here. What with being raised in a single (middle school teacher's) income household with an unemployed parent because a business venture went south leaving us bankrupt and having to work odd temp jobs. I paid for (and am still paying for) my own college education, thank you very much.

But all of that is beside the point. It doesn't take a college degree, or even a fucking high school diploma to go to the library and check out "Investing for Dummies" and read the first chapter. Nor does it take a college degree or a high school diploma to think that perhaps before you invest your entire life savings into something you know nothing about, that you do a little research.

11/15/2008 11:47:13 PM

Quote :

"Because you say so and are incapable of disputing others when they demonstrate your lack of comprehension."

You pull some nice econ theory out of one of your little text books, slap it in the thread and call it a day, then when I can't figure out what it is you've posted because what you've posted doesn't at all jive with the real world, you're going to cry I didn't bother to respond to you? I'd love to see you use a one or two definitive real world examples of companies that fit that little theory you posted. I can imagine we'll be waiting awhile. I'm honestly not sure what to think at this point that someone with such a solid grasp of economics thinks investing in the stock market is as simple as what you posted above.

Let's just remember that my buy and hold commented started with a post from CNBC that has a poll with nearly 1600 respondents where 60% are agreeing that buy and hold isn't going to work in the near future.

Quote :

"But that's ok, the rest of us are inauthentic Richie Riches just because we have library cards and therefore don't deserve to be talked to as fellow human beings."

What can I say, it's the wolf web. Only a few people take the time to actually care what they are talking about. Sometimes that's me, sometimes it isn't. And notice I didn't call everyone "richie riches" and that comment had a lot less to do with you and a lot more to do with people like duke having the damn audacity to think he actually knows my family.

I really appreciate the by the book econ you bring to this section on the regular, I don't really care for high brow level you resort to from time to time when you are trying to make an argument. Every time I've read a post of yours that seems to be pretty deep into the econ without a simple example (like kwsmith had to provide) I get the impression what it is you have posted doesn't really answer the question conclusively and I just don't have the time to try and read between the lines. If you don't like that a layman can't decipher your deep econ knowledge when it seems to be rather arbitrarily applied, then maybe consider the delivery.

Quote :

"Buy and hold is 30+ years, and over that time, the stock market kills in ROI. You can't declare buy and hold dead, when you haven't held."

Sure buddy, tell that to the folks that bought on the way up in the late 20s. Twenty five years of nothing! Solid buy and hold there.

Quote :

"Nor were financial planners a dime a dozen for secretaries in the 1960's but that didn't stop my grandmother from teaching herself the stock market and investing and diversifying enough that what she left behind when she died has provided for a great portion of my grandfather's medical expenses and living expenses. And that was after she sent 5 kids to college on her dime. My anecdote > your anecdote."

No, I'd say they are equal anecdotes of American experiences. Sounds like your grandma had a supportive family that gave her the smarts to actually know what the stock market was. While she was big a good matriach to your family, my Dad was getting bounced from uncle to uncle to eventually older sister because his step mom told my grandfather it was either him or her after my grandmother died. Guess who won? Regardless of all that, you can fuck off for all I care you cunt.

Quote :

" Oh yeah, real silver spooners here. What with being raised in a single (middle school teacher's) income household with an unemployed parent because a business venture went south leaving us bankrupt and having to work odd temp jobs. I paid for (and am still paying for) my own college education, thank you very much."

Why waste both of our times? Did you miss the "college educated" part of the statement you just reacted to?

Quote :

"But all of that is beside the point. It doesn't take a college degree, or even a fucking high school diploma to go to the library and check out "Investing for Dummies" and read the first chapter. Nor does it take a college degree or a high school diploma to think that perhaps before you invest your entire life savings into something you know nothing about, that you do a little research."

Wait, there you go again with the double talk. My father had heard you can't lose money in the stock market. Buy and hold. Why on earth did he need to go check out a book? He'll be working until he is 80 to get back to where he was in 1999. Is the market risky or not? When you consider we don't manufacture dick anymore, we've gotten good at creating fake wealth, why can ANYONE be safe with thinking buy and hold is going to be a good strategy in the near term?

[Edited on November 16, 2008 at 12:04 AM. Reason : .]

11/15/2008 11:49:16 PM

Quote :

"Sure buddy, tell that to the folks that bought on the way up in the late 20s. Twenty five years of nothing! Solid buy and hold there. "

Quote :

"Buy and hold is 30+ years, and over that time, the stock market kills in ROI. You can't declare buy and hold dead, when you haven't held."

Enough said.

Quote :

"Regardless of all that, you can fuck off for all I care you cunt. "

Hey, you're the one who brought your family into this as an example of Joe Typical who lost his shirt in this. If you didn't want people calling them out for making dumb ass mistakes that could have been avoided by anyone who sat and thought for longer than 30 seconds about it, you should have kept your mouth shut.

Quote :

"Why waste both of our times? Did you miss the "college educated" part of the statement you just reacted to?"

You really think this has to do with college ed? Hell I knew the stock market was a risky gamble in middle school. All it takes is a little reading. Hell they teach you about the market crash as part of american history, that alone should tell anyone there's risk. And again, how did he manage to invest his money without once meeting a broker, visiting a brokerage site or viewing a prospectus (how did he even decide what to invest in without this stuff) and how did he miss the warnings plastered all over about risk and past results not guaranteeing future results?

Quote :

"My father had heard you can't lose money in the stock market. Buy and hold. Why on earth did he need to go check out a book?"

I bet he also got a great deal on a bridge in New York City and knows of some great water front property in Florida.

Quote :

"Is the market risky or not?"

It's risky. I don't know how many times I have to say this before you get it through your thick skull. But the utterly fantastic ROI is because it's risky. Investing 101. Again, so sorry that your dad was a fool, but next time, he should do his own research before he dumps his life savings into something. At least its in stocks where he has a chance to get it back and not with a prince in nigeria who needs to escape his money with much lump sum cash.

11/16/2008 1:18:48 AM

Quote :

" Enough said."

hahahahhahaha. Five years of returns after 25 years of nothing. Enough said? I guess when your argument has been trounced, there really is nothing you can say.

Quote :

"Hey, you're the one who brought your family into this as an example of Joe Typical who lost his shirt in this. If you didn't want people calling them out for making dumb ass mistakes that could have been avoided by anyone who sat and thought for longer than 30 seconds about it, you should have kept your mouth shut."

I didn't say my pops lost his shirt, only a huge chunk of it. His example is real and the very fact that programs like the topic of this thread are even being talked about lets me know there are probably millions of other stories like his. Here's a tip, those of us in this thread are in a pretty special group to be able to talk about it this far ahead and these terms, don't go around life with your snout sky high in the air because you worked your way through college and just assume the entire country knows all the golden secrets you do, there isn't anything special about that. Oh sure, you'll come back to the thread and try some pathetic defense about your attitude, but you make it pretty clear over and over again, especially with your big L libertarian views, that every decision in life is clear cut and if people made them they'd have zero problems or troubles.

Quote :

"You really think this has to do with college ed? Hell I knew the stock market was a risky gamble in middle school. All it takes is a little reading."

Well smart guy, you have a grandmother who sent 5 children to college with one of them being your parent. College educated people were surrounding you from the womb. So yeah, it does have to do with college you thick skull asshole.

Quote :

"And again, how did he manage to invest his money without once meeting a broker, visiting a brokerage site or viewing a prospectus (how did he even decide what to invest in without this stuff) and how did he miss the warnings plastered all over about risk and past results not guaranteeing future results?"

A rather successful uncle had been telling him for YEARS that he was making an absolute killing in the market (basically he was riding the .com wave up). So, my dad, the ever cautious about his extremely hard earned 401k finally and hesitantly went to the same planner my uncle had been using who advised him on some nice mutual funds that then proceeded to shit the bed. That right you dipshit. A financial fucking planner was the guy who advised him on that. Here's something that might surprise you as well. Financial planners can and do occasionally suck ass and I suspect with this market crash, there are millions others just like him that have lost sizeable chunks of their retirement as hardly any sector of this market has been safe. You do realize that even Gold has taken a ~25% haircut since this whole mess began, right?

Quote :

"I bet he also got a great deal on a bridge in New York City and knows of some great water front property in Florida. "

You're probably a spoiled brat. I bet your mother still coddled you and breast fed you until you were 8 you little punk.

Quote :

"It's risky. I don't know how many times I have to say this before you get it through your thick skull. But the utterly fantastic ROI is because it's risky. Investing 101."

Again, you just don't get it. How risky can something be with a fantastic ROI. Seems like you are specifically leaving the risk part out of the equation to even make the statement.

Quote :

"Again, so sorry that your dad was a fool, "

What can I say, he didn't fuck up his sons college education with a business venture. My anecdote > your anecdote.

[Edited on November 16, 2008 at 7:33 AM. Reason : ..]

11/16/2008 7:33:07 AM

If you did not understand it when I explained or when kwsmith2 explained it then there is very little hope. It doesn't get any simpler than: when people buy a stock the price today goes up, when the next guy buys that stock today at the higher price he will receive a lower rate of return on it from here on out. If you could do the courtesy of pointing out which step in this logic you get lost on, let us know.

Quote :

"I'd love to see you use a one or two definitive real world examples of companies that fit that little theory you posted."

I gave you examples. In any technological revolution the vast majority of firms go bankrupt. As such, being a non-diversified stock-holder at the beginning of a technological revolution is insane: no amount of waiting will bring your pets.com stock back. If you are lucky and only invest in Google or Amazon then you will win immense returns. But I am not a party to sufficient insider information to ahead of time tell which will win big and which will lose all.

The examples are widespread. Of all the money invested into Railroads in the 1840s, the vast majority went bankrupt. Yes, the people enjoyed them and they drove the economy forward, but the owners were wiped out through competition and incompetence with the new technology. Accounting for all the money invested, the return was negative. However, after the 1860s, railroads in britain were on average wildly profitable.

The examples also include the dot-com bubble. Since the 90s, Google and Amazon have been wildly profitable, but their profits have not come close to recovering the losses suffered by other dot-com investors. However, buying dot-com companies post bubble has produced great returns.

So, again, as investors please stop praying for technological revolutions. They are great for society as a whole, but they rarely pay off for current investors.

11/16/2008 11:22:49 AM

Quote :

"or when kwsmith2 explained it"

No, I got what you attempted to show when he explained it. Thanks kwsmith. You still haven't shown how buying a winner drives up the return of a loser. Losers don't magically become winners overnight. And of all that, you still haven't really shown at all how that connects to buy and hold.

Quote :

"I gave you examples. In any technological revolution the vast majority of firms go bankrupt. "

I thought you said buying the winners (in this case, Google and Amazon) would drive up the returns of the losers? Huh?

Quote :

"But I am not a party to sufficient insider information to ahead of time tell which will win big and which will lose all. "

So, now I need insider information to pick stocks? Did the guys on Wall Street, the smart professionals, that got extremely upside down on the housing bubble need insider information to make such a bad call?

Quote :

" The examples are widespread. Of all the money invested into Railroads in the 1840s, the vast majority went bankrupt. Yes, the people enjoyed them and they drove the economy forward, but the owners were wiped out through competition and incompetence with the new technology."

So, what you're saying is if you bought and held railroads, you were fucked? But if you locked in some profit when you first started noticing the signs of competition, you looked like a genius, or merely observant?

Quote :

"The examples also include the dot-com bubble. Since the 90s, Google and Amazon have been wildly profitable, but their profits have not come close to recovering the losses suffered by other dot-com investors. However, buying dot-com companies post bubble has produced great returns."

There were plenty of people that were skeptical of the dot.com bubble just as there were plenty of people that were skeptical of housing never going down. Those people didn't buy and hold, and they made great calls.

11/16/2008 1:00:54 PM

Quote :

"You still haven't shown how buying a winner drives up the return of a loser. Losers don't magically become winners overnight."

Its selling the losers that drives up the return. So, ultimately the value of owning a stock is that you own part of the future profits.

So when a stock heavily sold its price will drop. This means that a new buyer can get the profits for a cheaper price. So technically, its irrelevant what happens to winners, when calculating the loser's return. Its the fact that they are losers that drives up the return.

Now in reality people sell the losers so that they have money to buy the winners. So, the two are connected. However, that's because most trading occurs by people who are already deeply invested in the market, so they have to sell in order to buy.

11/16/2008 2:26:06 PM

Look your dad made a classic investing mistake.

He sat on the sidelines and accumulated a pile of money in safe investments. During that 20 years he made basically no interest and given the high inflation during that time period he probably actually lost his ass in real returns.

Then after an immense bull market he finally became convinced that it was time to buy and moved a lump sum amount into a peaking market.

Then the market took a dump and presumably he sold and lost money and cursed everyone involved.

It's a shame he didn't take the time to learn what he should have done instead.


Had he been dollar cost averaging into the market for the entire 20 year scenario he would have had a terrific rate of return.

11/16/2008 3:07:56 PM

Quote :

"No, I got what you attempted to show when he explained it."

Clearly not if you STILL don't get it. By others buying your winners and driving up the price today they are driving down the return of buying your winners, which drives down the overall market return. If enough people do that the return to buying your winners will drop below the return of buying stocks you consider losers. This did not relate at all to Buy and Hold if you actually bothered reading. The point is that at any given instant, given the information available, the benefit to buying any given stock should be equal to the benefit of buying any other stock unless you know something everyone else does not, which means your idea of only buying winners for short periods of time is a losing prophecy because, at best, you will enjoy comparable returns while suffering greater fees.

Quote :

"I thought you said buying the winners (in this case, Google and Amazon) would drive up the returns of the losers?"

Relative to buying your winners.

Quote :

"So, now I need insider information to pick stocks? Did the guys on Wall Street, the smart professionals, that got extremely upside down on the housing bubble need insider information to make such a bad call?"

Professionals in the business lose millions and your first thought is that someone that can't manage the basics should do better?

Quote :

"So, what you're saying is if you bought and held railroads, you were fucked? But if you locked in some profit when you first started noticing the signs of competition, you looked like a genius, or merely observant?"

No. You still don't get it. If YOU notice the signs of losses then everyone else already has as well and the price has already collapsed. And you want to lecture others on investing?

Quote :

"There were plenty of people that were skeptical of the dot.com bubble just as there were plenty of people that were skeptical of housing never going down. Those people didn't buy and hold, and they made great calls."

There is a difference between being skeptical and putting your money where your mouth is. Had they done so, they would not have just made good calls, they would be fabulously wealthy.

11/16/2008 4:13:08 PM

Just what are you describing as "my winners"? Stocks that I intend to buy after I identify them as winners, or stocks that I am holding that become winners? I think you've severely misinterpreted what has been stated and you've wasted a lot of everyone's time. You're also mildly retarded if you think the market is perfectly efficient and that all it's participants have all possible information about a company. The fact that you're treating these all of these equities as perfect equals at any given point in time is really bizarre. You still apparently refuse to acknowledge losers don't magically become winners.

Quote :

" Professionals in the business lose millions and your first thought is that someone that can't manage the basics should do better?"

I think you meant "professionals". I've been following guys that have been sounding the housing alarm for a long time, you know, guys that haven't been idiots about this shit. They've saved me TONS as I pulled my cash out of certain stocks to the sidelines. I've saved deep into the 5 figures by getting out of the way of this crash.

Quote :

" No. You still don't get it. If YOU notice the signs of losses then everyone else already has as well and the price has already collapsed. And you want to lecture others on investing?"

No sir buddy. Not at all. Again, please refer to everyone that has been losing their shirt since last October, and those that haven't.

Quote :

"There is a difference between being skeptical and putting your money where your mouth is. Had they done so, they would not have just made good calls, they would be fabulously wealthy."

Are you joking? Did you read the part where I said "they didn't buy, they made great calls". Those people put their money where their mouth was. The fact that information asymmetry (and lack of it) is alive and well is the very check on people becoming fabulously wealthy and just merely wealthy. Those folks obviously didn't know which of the .coms were going to survive (Amazon, etc) but they knew which ones really stank (pets.com) and made the correct decisions. Not everyone made the decision early enough.

[Edited on November 16, 2008 at 6:05 PM. Reason : .]

11/16/2008 6:03:06 PM