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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: Tommaso who wrote (847)11/21/2000 4:54:44 PM
From: Wyätt Gwyön  Read Replies (1) of 74559
 
Good points, Tommaso. It is ironic that the LTBH mentality takes root when the risk/reward ratio is unappealing. People in the US think it is the most natural thing in the world to put most or all their eggs in a stock market basket, with the only argument being about what type of basket (indexing, Gorilla Gaming, momo, Dogs of the Dow, etc.) is best. There seems to be an implicit assumption that while the market could go down for a year or two, we will be better off "in the long run". As Keynes noticed, in the long run we're all dead, and the market might not be courteous enough to behave according to our capital needs.

I like to contrast this with Japan, where many young people (not to mention old people) keep all their funds in cash. What would you expect them to do given that the Nikkei is more than 50% below its highs of a decade ago. They have developed alternative strategies for building "nest eggs". Mainly that means saving a lot and probably working for a long time (and perhaps retiring poorly).

Who in America would recommend a 30-year-old to be all cash? But that is commonplace over there.

Somehow, I think our market's behavior this past decade influences our thinking (expect more rewards), just as is the case there.
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