Never buy stocks unless you love losing money. Stocks lost 2/3rds over last decade.

Discussion in 'Wall St. News' started by ByLoSellHi, Apr 14, 2009.

  1. http://www.marketwatch.com/news/sto...93369-730F-4670-BD61-CCA853F57C8B}&siteid=rss

    Best strategy for long bear market 2010-2020

    Bonds beat stocks by factor of 11 from 1981 to 2009, but can it continue?

    By Paul B. Farrell, MarketWatch
    Last update: 6:37 p.m. EDT April 13, 2009

    ARROYO GRANDE, Calif. (MarketWatch) --
    Never buy stocks. Never. Unless, of course, you love gambling (and losing) at the Wall Street casino. Or you don't mind making payments on your broker's BMW. Or you just joined a monastery and just took a vow of poverty.
    Otherwise, don't buy. Stocks are losers.
    At least that's the only rational investment strategy you'll come away with after reading economist and long-time Forbes columnist Gary Shilling's analysis of the miserable performance of stocks during Wall Street's recent bull/bear cycles, beginning with the election of President Reagan in the early 1980s.

    And it gets worse when you project into the bear market predicted for the next decade, till 2020. Ergo, more tough times ahead for investors, possibly a sequel to the painful sideways bear of 1968-1982.

    So I ask you: Knowing the history, why would anyone in their right mind invest in stocks? You'd be a fool, right?

    Yes. But join the club. We are a nation of "those who cannot learn from history," as the philosopher George Santayana once warned, so we "are doomed to repeat it."

    Statistics prove that year after year America's 95 million investors are indeed clueless fools, easily conned into buying stocks by what BusinessWeek once called the "Wall Street Hype Machine."

    We never learn, no matter how painful the losses, we just keep repeating the same old mistakes, over and over, forever falling under Wall Street's magical spells.

    Admit it: We've become the laughingstock of history. Wall Street's giants were bankrupt, in fact and morally. In reality, they were nationalized. Their bosses are arrogant, greedy and incompetent. All should have been fired. Yet we were stupid enough to give them $2.2 trillion in tax dollars to bail themselves out.

    Want more proof? Here's how easy it is for Wall Street to scam you, year after year:
    Bonds beat stocks by factor of 11 times from 1981 to 2009.

    Yes, and you'd have been 11 times richer.

    Listen closely to Shilling's analysis of the past 28 years. In his Insight newsletter he compares the performance of the S&P 500 stock index to the bond market.

    First he focuses on his "all-time favorite graph" comparing "the results from investing $100 in a 25-year zero-coupon Treasury bond at its yield high (and price low) in October 1981, and rolling it into another 25-year Treasury annually to maintain that 25-year maturity."

    His bottom line: "On March 31, 2009, that $100 was worth $16,656 with a compound annual return of 20.4%.

    In contrast, $100 invested in the S&P 500 at its low in July 1982 was worth $1,502 last month for a 10.7% annual return including dividend reinvestment. So Treasurys outperformed stocks by 11.1 times."

    Never heard of this fabulous alternative? Of course not. Wall Street can't make millions in commissions this way. Instead, during this same 28-year period, Wall Street was using high-pressure sales gimmicks to sell its losers to America's 95 million vulnerable investors.

    Imagine: If you were in your 20s and just out of college back in 1981, and you started adding a hundred more bucks each and every month using Shilling's zero-coupon strategy, you'd be enjoying early retirement today, instead of crying because your retirement stocks lost half their value.

    Shilling adds a word of caution about the future: "We've had been recommending long Treasury bonds since 1981. Back then, we forecast secular and huge declines in inflation and interest rates. So we declared that 'we're entering the bond rally of a lifetime.' Unfortunately, that rally is over." We need new strategies.

    Stocks lost over two-thirds in the last decade.

    We've also been writing about the absurdity of trading and investing in stocks for a long time. Back in mid-2008 when the DJIA fell below its 2000 high (11,722) it was obvious to investors that their portfolios had flat lined for eight years. Yes, zero returns on your portfolios for eight years. And it's worse when you deduct fees, commissions, taxes and account for inflation: Most portfolios lost over 65% of their value since 2000.

    Yet, while Main Street investors were being scammed, Wall Street bankers were paying themselves huge megamillions in salaries plus $36 billion annual bonuses to their staffs for selling us their loser stocks. In 2006 during his last year as CEO of Goldman Sachs, former Treasury Secretary Hank Paulson added $38 million to his half-billion fortune.

    Yes folks, Wall Street's business model is still "greed is good," a license to steal your retirement money. And Congress supports their crooked ways (thanks to Wall Street's lobbyists). They're "stealing" from you, always have been, always will -- and given what's happening with the Fed, Treasury, Congress and the White House, it is guaranteed to get worse in the years to come.

    So I ask you again: Why would you ever invest in stocks?

    -CONTINUED BELOW-
     
  2. -CONTINUED FROM ABOVE-

    And if that stock market performance isn't scary enough to make you swear off stocks for the rest of your life, listen to what Shilling has to say about the next decade, based on our financial history from 1949 to 2009.

    Sixty years of bull/bear cycles will project into a secular bear for the next decade, to roughly 2020, with occasional short-term cyclical bull markets and dead-cat bounces. In short, expect a very rough decade for the economy, market and tax-paying public. Here's the history of past cycles:
    1949-1968: Secular bull market
    The great post-WWII expansion: "The 1949-1968 secular bull market was driven by postwar economic growth, fading deflation fears, low inflation, the institutionalization of equity and the resulting leap in P/Es."

    1968-1982: Secular bear market
    Shilling says "inflation caused by huge Vietnam and Great Society spending dominated the 1968-1982 secular bear market as it pushed interest rates up and P/Es and productivity down." Remember the oil crisis, recession and a long sideways stock market for over a decade.

    1982-2000: Secular bull market
    With Reaganomics "the unwinding of inflation generated the 1982-2000 secular bull market, aided by the consumer spending spree and, finally, dot-com speculation," says Shilling. Oh how we loved stocks with 30%-plus returns, some even posting 300% annual returns. We went crazy. Yes, "this time it's different," as barbers offered investment advice and neighborhood barbecues were abuzz with early retirement plans.

    2000-2020: Secular bear market
    Then our dreams failed us, but we refused to let them die. Shilling says "the speculative investment climate spawned by the dot-com nonsense survived. It simply shifted from stocks." Our retirement, "pension and endowment funds have been increasing their exposure to alternative investments such as commodities, foreign currencies, hedge funds, private equity, emerging-market equity and debt and real estate" in recent years. Yes, the '90s insanity did survive, like Frankenstein, transplanted in a new body by the White House, Treasury, the Fed, defense contractors and Wall Street.

    "A secular bear market really started in 2000 and may persist for a decade as a result of slower GDP growth ... here and abroad ... with 2% to 3% deflation." Shilling warns: "Nominal GDP might not gain at all."
    So where do you put your money the next decade in a risky secular bear market? His "investment themes continue to center around a further collapse in housing and the deepening recession that's been underway for more than a year. Continuing significant declines in house prices eventually will benefit rental apartments and manufactured houses. We also believe that a faltering economy will put more pressure on profits and stocks, and initiate chronic deflation, supporting current low Treasury yields ... the dollar is rallying as economic weakness spreads abroad and the commodity bubble is bursting."

    Bottom line: Shilling's "unfavorable investment themes" include: Major banks, subprimes, consumers and other lenders, domestic stocks, conventional home builders, consumer spending sectors and risky, speculative investments.

    "Favorable themes" include: The U.S. dollar, and for the long-term, dividend-paying stocks, asset managers, Treasuries, North American energy, apartment REITs and factory-built homes.

    Remember: Don't be a fool ... stop listening to Wall Street's bigger fools.
     
  3. No one wants to or can rebut this very strong assertion?

    Listen closely to Shilling's analysis of the past 28 years. In his Insight newsletter he compares the performance of the S&P 500 stock index to the bond market.

    First he focuses on his "all-time favorite graph" comparing "the results from investing $100 in a 25-year zero-coupon Treasury bond at its yield high (and price low) in October 1981, and rolling it into another 25-year Treasury annually to maintain that 25-year maturity."

    His bottom line: "On March 31, 2009, that $100 was worth $16,656 with a compound annual return of 20.4%.

    In contrast, $100 invested in the S&P 500 at its low in July 1982 was worth $1,502 last month for a 10.7% annual return including dividend reinvestment. So Treasurys outperformed stocks by 11.1 times."

    Never heard of this fabulous alternative? Of course not. Wall Street can't make millions in commissions this way. Instead, during this same 28-year period, Wall Street was using high-pressure sales gimmicks to sell its losers to America's 95 million vulnerable investors.

    Imagine: If you were in your 20s and just out of college back in 1981, and you started adding a hundred more bucks each and every month using Shilling's zero-coupon strategy, you'd be enjoying early retirement today, instead of crying because your retirement stocks lost half their value.
     
  4. If you bought the Dow in 1932 at 40 and sold it 28 years later (1960) in the 600s you averaged an annualized 25.7% without even accounting for dividends, safely outperforming bonds. Buying 100 year lows helps I guess, just like in Shillings ridiculous bond example.

    "Never buy stocks unless you love losing money" (from the thread title)

    Stocks may have underperformed bonds for the last 30 years. I am not sure how predictive that is for the next 30.
     
  5. S2007S

    S2007S

    The market isnt going anywhere anytime soon, you will be able to buy the same stocks priced around the same price today and maybe even lower a decade from now. Anyone who thinks they have to rush in and buy is just going to be fooled by the market volatility.
     
  6. CET

    CET

    He still has not figured out this is Elite Trader, not Elite Investor. Get back to flipping those burgers.
     
  7. You must be an Elite Trader.



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  8. Funny how a year ago everybody was touting stocks as being the best asset class in the long term. Then the crash of 2008 and all of a sudden stocks are terrible and gaurenteed to lose you money.

    After the depression I bet people came up with the same analysis saying "stocks are terrible and will only lose you money". Those people would have missed out on massive amounts of money.

    Bonds might be better if you simply wish to buy and hold until retirement without doing any homework in the meantime, but anybody with any finance knowledge whatsoever is sure to make more money in stocks than bonds.