>>it ain't coming back!<<
Allan Newman, editor of the HD Brous & Co newsletter agrees with you. The professional short sellers line up for his newsletter.
I was reluctant to post this because he's very critical of the insider selling at Microsoft. Trust me.
>>The buy-and-hold mantra was and is clearly a myth perpetrated by ignorance.
As we see here, the money market investment comparison made 62 months ago at Dow 6448 has outperformed stocks by so much to date that Wall Street's insistence upon the long term mantra is truly laughable. After 62 months, the meager profits of $162 for Dollar cost Averaging (as of 2/27/02) prove that the common wisdom is worthless. Wall Street has pushed Dollar Cost Averaging for years as a sure fire method of acquiring wealth, citing the logic of buying more shares at low prices as a mathematically valid proposition. We agree in theory. However, in practice, the only methodology that works is reason. If prices are too high, stocks should be sold and not bought. The proof is in the pudding.
The Inside Truth:
Over the last 62 months, stock investors have clearly been losers.
Given the history of an entire century, prices are still too high! Ten year annualized returns for the Dow Industrials are still hovering above 12%, far removed from the historical norm of 5%. Could the huge increase in returns signify the vaunted new era? The huge increase in returns certainly prodded similar thoughts in the 1920s and 1960s, yet both those eras witness regressions to reality and the norm. If anything, the current era stretched further in price and time than at anytime before and may need to be unwound in similar fashion - a deep and protracted secular bear market. The returns we show are without dividends, which have averaged over 4% over time. Thus the true return for stocks is roughly 9%. However, even when you consider that dividends throughout the mania have been extremely low, returns have still far exceeded the average. We expect that returns ex-dividends will drop sharply and that corporations will be forced to raise dividends as a result, to keep shareholders content. So, in both regards, we expect a regression to the norm. Clearly, returns ex-dividends have been under 5% more than half of all ten year periods and a similar retracement at this juncture would be a totally normal outcome. This, of course, might take years to unfold and the regression can occur in either price or time. For instance, if the Dow were to remain mired at the 10000 mark, the regression would be achieved in November 2006. If the Dow were to decline modestly over time to 8000, the regression would be reached by December 2005. If instead, the Dow declined to the 6437 level at which Alan Greenspan first suggested "irrational exuberance," it would only take until February 2005 for a return to "normal." Since the prior two huge bear markets resulted in returns below 0%, prices could indeed go a lot lower and the bear could extend a lot further out in time.
cross-currents.net |
