KeepItSimple,
Your reply was a very thought provoking post.
You can only get rich by being taking money from other people.
Personally, I reject this argument. I believe that when you invest in equities, what you are "buying" is the future earnings of the companies that you choose to invest in. As any given company's earnings rise (or fall), the price of the stock should behave similarly. At least that's the theory that many of us rely upon for our investing strategies.
While your premise is correct that to realize profits one must sell to someone else, I believe that when I sell, I have merely reached an exit point based upon my personal goals and time frames, not that my investment has turned into a lump of coal. For example, if I were to sell, say Nortel, today (because I had a pressing need for the proceeds), the buyer may be (or not) a young person with a 15 or 20 year time horizon for his/her investment to mature. Since I'm not a trader or a short term investor, I never stop to think that the buyer on the other side of my sell might be a speculator. It also helps to know that I don't invest in speculative crap, though some of my holdings were rather over-appreciated by any measure. (Witness Cisco or Intel!) But even these stocks will recover someday. Probably not tomorrow or even next week. But maybe 10 years from now the current bearish sentiment will likely be nothing more than a distant bad dream. How many people truly recall 1973/74, or October of 1987 or even the very recent 1994 correction? Probably not too many...
We, as a population, cannot simply bid the value of stocks to the moon and all become rich.
Very true as stated. A simple rule of economics...
But we all can share in the profits of our greatest companies, to some extent. I might guess that some people try to acquire greater shares than other people. <g>
Since nobody pays dividends anymore, the only way to make money in the market is by finding a greater fool.
Some companies do continue to pay dividends, and quite regularly as well. Many mutual funds exist that invest solely in stocks that pay dividends. If a stock ceases to pay a dividend (because of hard times or whatever), then these funds must sell that stock, which in turn creates downward pressure on the stock's price. This situation is exactly what is currently happening to California's utility companies, and just sit back and watch what happens to these companies in the markets as they are forced to suspend or eliminate their dividends.
I think what you really meant to observe was that many technology stocks pay little or no dividends, and investors are still infatuated with tech stocks. Therefore dividend paying stocks are more or less out-of-favor with many investors, who seem to concentrate more on capital gains rather than total return. Capital gains have the added feature that they are non-taxable gains until the stock is sold. If one is tax averse (as I am), then one could hold these dividend paying stocks in a tax-deferred account and still realize excellent total returns rather than simply capital gains.
The nasdaq will not see the highs reached in March in our lifetimes. Just ask Japan, Inc. Those poor bastards are still 50% off their highs set over a decade ago.
Unless you're planning on checking out sometime soon (I'm not), I think that the NASDAQ will recover to the 5000+ level someday. When depends strictly on corporate earnings and market perceptions. But I think it will happen, probably sometime within the next 5 years or so.
Japan was (and still is) an entirely different beast. Japan's problems are rooted in culture and how that culture has affected all of the infrastructure of their business and banking systems. In the USA, the banking system is very sound (at the moment). While we do have rising loan default rates (in particular credit cards), our banks are not the house of cards that the Japanese built in the 70s through the 90s. Our business systems and practices are relatively sound. While we have experienced a speculative bubble very similar to the Japanese bubble of the 80s, the "pin" that pricked the bubble was also very different. In Japan, the entire system and infrastructure failed miserably. In the US, the Fed tightened credit enough to let some air out. Right now it remains to be seen if too much air escaped at once or not. My gut feeling is that our economy is better off now that the speculative bubble is somewhat smaller. But we shall see what happens in the near future.
We aren't in for a recession, we're in for a DEPRESSION.
Game over man, game over!
Well, I certainly hope not. <g>
While we may be currently meeting (or possibly even exceeding) the criteria to define a recession, we are no where close to depression at this point in time. Using the Great Depression of the 1930s as an example, many events would have to come to pass to create another depression. GDP is still historically high in this country, though it now appears to be returning more to the historical norms. We have enjoyed unprecedented growth in our industries over this past 5 to 10 year period. As our economy returns to its norms, it might feel recessionary but it's really not. It's simply the economy returning to more normal patterns of growth. Employment is still at or near all-time lows. Banks are fiscally very sound, and continue to prosper. Farming and ranching, for the most part, is still providing sufficient food for the masses. So a depression is unlikely for the foreseeable future.
However, depression is still within the realm of possibilities. And God forbid that it ever happen, if it does come to pass, I'll forever remember that you were among the first to make the correct call. <g>
Best wishes, and Happy Holidays to you and your family.
KJC |
