On Thursday 30 August 2001 10:12, Jerry McBride wrote:
| A tough day for wall street. Right about now, all those nice certs
| in my stock protfolio
| are about as worthless to me as a 12 pack of toiletpaper... but too
| rough to enjoy...
|
| Say what? ;')
not to put too fine a point on it, and not to minimize your loss in
any way, but it has been highly obvious for close to five years now
that the equities market was being driven almost entirely by fantasy.
consider that at the end of 1999, va linux was selling for more than
$250 per share -- and it had never earned a penny, had no prediction
of when it would earn a penny, and had no prediction of *how* it
would earn that penny. several of my friends and i remarked at my
wedding on october 25, 1997, how happy we were to have gotten out of
equities. the market crashed on october 27. we all gradually got back
in, but in stuff for the long haul, and not stuff that was based on
pipedreams and daily stock following. in fact, most of us bought
during the crash itself (i, on my honeymoon, didn't). interestingly,
some index fund stuff i have has consistently made money. it was
worth more on paper a year ago, but not enough to cover the taxes had
i sold it then. still, i've made a good 15 percent or so. point is,
the market is not a crap game, and "indistry analysts" and
"securities analysts" are little different from the island women who
appear on late night television offering their fortune-telling
services for $2.95 per minute, except that the jamaican ladies are
cheaper than the analysts. just a little while ago, on the other
list, i coincidentally posted this, in a thread there:
On Thursday 30 August 2001 19:43, Les Bell wrote:
| Yup, except for the obligatory doomsaying quote from an "industry
| analyst" who is close to completely clueless. Really, how such
| people manage to keep their jobs, let alone garner the money and
| influence they do, is utterly incomprehensible to me.
"industry analyst" is the one profession whose practitioners are
*never* required to be correct, not even occasionally, not even in
keeping with the principles of probability (which state that one of
the novelty toy 8-balls will probably be correct some of the time).
there is no need for evidence beyond looking at what industry
analysts were saying a year ago, and how much wealth has disappeared
since then because people believed them. (now they're looking for
places to put the blame, the chief one being the "economic downturn,"
apparently hoping that no one notices that the reason there is an
economic downturn is that they were selling boxes of air at ever
higher prices for more than a decade, all the while appearing on
television and, in their role as industry analysts, saying what
bargains these boxes of air were.)
grr.
| his retirement is all
| but gone. Talk about a lost soul. I know and work with people that
| have lost 100's
| of thousands of dollars in the last year or so...
|
| My god, what have we done?
you haven't done anything, unless you cash out now. if your boss is
still bossing, then his retirement isn't all but gone -- it's lost a
lot of paper value; because he doesn't need to cash out now. and if
he invested in boxes of air, then he wasn't as concerned about his
retirement as he should have been. and he started investing very late
in the game -- anyone who invested in anything that's even close to
the indices beginning as late as 1995 is ahead, considerably. take
ibm -- it closed at about $100 today. it closed at about $100 just
about anytime in 1995. but since then it's had a 2:1 split, so that
1995 $100 is actually $200 now. microsoft is selling for less than it
was, but it has had a split as well. (so, for what it's worth, has
red hat, so anybody who got in at the ipo price has lost only half
his money -- and anyone who got in at a higher price should limit his
investments to savings accounts.)
now, consider some other things before deciding that the economy has
gone to hell. interest rates are way down. that makes things like
home refinancing very worthwhile, and because home values have risen
it means that refinancing very often comes along with a bunch of
cheap cash. a way to find one's way out of an investment nightmare
can be, believe it or not, more investment. there's a very simple
trick to this, called dollar cost averaging, and here's how it works:
you decide to spend a certain amount of money each month on
investments -- diversified investments, i might add; a mix of
high-quality debt, maybe some growth equities, and certainly some
high-quality equities. and you buy that dollar amount, rather than a
fixed number of shares, each month. the result is that your average
cost per share drops. a simple example:
i set aside $60 per month to buy caldera. first month this gets me 10
shares @$6. second month it gets me 20 shares at $3. third month it
gets me 30 shares at $2. fourth month it gets me 60 shares at $1.
fifth month it gets me 100 shares at $0.60. at the end of five
months, i have spent $300, for which i have 220 shares, average price
$1.36.
had i instead decided to buy 10 shares of caldera per month, at the
end of fine months i would have 50 shares, costing me $126, for an
average price of $2.52.
you can see the difference, and it's due to the fact that by
employing a fixed amount instead of a fixed number of shares, one
automatically takes advantage of the dips.
for what it's worth, if you've taken a whack in the market but it
looks otherwise as if you will have some tax liability at the end of
the year, you can sell some of your holding and take the loss,
because that loss is fully tax deductable.
| I gotta' tell you guys and gals... my heart of hearts is predicting
| doom. Where it's comming
| from I'm not real sure. Is it NAFTA? Cyclic changes in the market?
| Who knows. Just
| be sure you're ready for it, though. It's gonna' be tough.
it's not nafta and only to some small extent is it regular market
cycles. if the 1980s were the "me" decade, the 1990s were the
"utterly clueless" decade. it began with the soviet bloc collapsing,
which perhaps provided enough evidence for people to start believing
also that the law of gravity had been repealed (though those who
acted upon this are not around to report on their findings, which
were that it hadn't). we decided that we expected nothing from our
leaders, nothing from the companies in which we invested, nothing in
general. the amount of baby boomer retirement money was rising
exponentially -- demographers refer to this phenomenon as "the pig in
the python," and i attended meetings with sen. dave durenberger,
reps. tim penny and lynn martin, ben wattenberg, and a bunch of
others as early as 1987 in which we were all wondering how to prevent
what ultimately came to pass -- and it was chasing a finite number of
places to invest. interest rates came down for awhile -- the
"crowding out" effect -- and the market rose, as the huge amount of
money bid up prices (supply and demand). in addition, people
abandoned common sense wholesale. they believed that the market would
rise 20 percent a year forever, which is total nonsense. they
believed that companies which had no ability ever to make money were
good investments, which was nonsense, too. they applied no powers of
critical thinking to anything from a philandering president who would
bomb foreign countries to cover disclosures of his own personal
failings to investments that were in some cases little better than
lottery tickets, except that in the lottery someone ultimately wins.
this kind of thing does not go on forever; it cannot. this was not a
house of cards but a house of tissues inflated with smoke. there was
no need for anything external to bring it down -- it had to collapse
from its own weight. that has happened and continues to happen.
that having been said, the economy is not on the verge of collapse.
far from it. it is still growing, albeit slowly. most of the layoffs
and closings you are hearing about have nothing to do with a failing
economy but instead an economy in the real world and companies
finally adjusting to the fact that what one wishes to be true is not
the definitive description of the real world. computer companies are
realizing that not everybody will blow a grand a year on a new
machine, and dotcoms are realizing that click-through ads are not as
effective as they had hoped. indeed, it may well be that the internet
itself will level out and perhaps even decline a little, the novelty
having worn off -- surely you must admit it had its fad aspects. some
people are actually getting lives. so the real world adjustments are
merely to bring expectations in line with reality. i suspect that we
will learn over the next few years that the economic growth reported
over the last several years has been drastically inflated, the result
of cooked books, and that we've been moving along at a healthy 2 or 3
percent growth rate, which is not far from where we'll end up this
year. (an important piece of evidence in connection with this is the
lack of inflation.)
| If what my mom told me when I was a kid... that $600.00 that Bush
| wants to send me
| may not be enough to buy bread and milk next year.
so, then, you are predicting inflation? that's actually pretty
unlikely. a measure of that is the fact that interest rates have
dropped, a lot. when you can borrow money at low price, that's not
some analyst saying what you should do with your money; it's actual
money being done with, by people who have a fiduciary responsibility
to guard it. people who put money where their mouths are.
| Sorry. I'm usually a lot more upbeat than this... Good night and
| God bless.
get some rest, and relax. take a look at your portfolio, and if its
performance has been truly awful, invest with someone else. but don't
think that all is lost. it isn't.
--
dep
one day, you'll wish it was now.
your wish has been granted.
don't waste it.
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