Hi Mike,
Thanks for the response. No, I don't think stocks are any different at all; nor the markets in general. I agree that people are wrong to think that stocks are safe (as opposed to gov't insured bank accounts (currently 45% of my holdings)) and these unfortunate people are not doing risk/return analyses of their investments. The stage is indeed set for disaster and I have been shifting to a defensive strategy because I don't want any part of it.
My point, well, question really, is how a bear market can occur when money is being forced into the market? Is a bear market defined by the decrease of shareprice, market value, capitalization? Where will the money go if it leaves equities? And how is it going to leave equities if mutual/retirement managers and individuals en masse continue to inject money?
An example of the defective mindset was in my morning paper. It described the downfall of a mutual fund manager (for Brandywine I think). Apparently, for the past 15 and 10 year periods he has been a star performer BUT 8 months ago he moved his funds to a defensive position (high cash) out of fear of asian crisis and other things. Well he missed out on this past leg of the mad bull market and his competence has been called into question. He even apologized for his caution. All of this for less than a year of lack-luster returns! His fund required 70% equities except in special situations and most funds appear to have similar orders.
I'm not saying that this is appropriate just that this is the landscape of the current market. I don't know if mutual/retirement fund inflows will prevent a bear market. I do know that the market is obscenely over-valued but everybody thought so back at 8000, 6000, 4000... Who knows? But if there is any credence to the inflow theory then one could make predictions based on the demographics of and needs of the boomers. If companies use demographics in their strategies then a young, long-term investor should in his investing. Therein lies my interest in this discussion.
John |
