Announcement

Collapse
No announcement yet.

Money Magazine: Why you should be buying stocks now

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Money Magazine: Why you should be buying stocks now

    Note that the author of this advertisement for the Casino doesn't use a name. Is it any wonder?

    Why you should be buying stocks now

    You've just discovered that you're not as brave as you thought. Don't make it worse by acting on your fear.

    By the Mole, Money Magazine's undercover financial planner
    December 3, 2008: 9:27 AM ET

    (Money Magazine) -- When new clients come to me, I ask them a few questions about risk. One is "What would you do if the value of your stocks fell by 50%?"

    The vast majority answer that they would buy more stocks. So now that the market has lost about 40% of its value, why are some of these same clients clamoring to sell?

    Risk tolerance ebbs and flows. From 2003 to 2007, U.S. stock prices nearly doubled and international shares nearly tripled.

    During such good years, you tend to believe that you have a high tolerance for risk. At times like these, your willingness to take chances drops sharply.

    Such mood swings can lead you to jump in and out of the market and chase good performance, with devastating results.

    According to a 2007 study of investor returns from 1991 to 2004 published in the Journal of Banking & Finance, the average investor pays a 1.5-percentage-point annual penalty for that kind of behavior.

    My advice is to never rely on a risk questionnaire to tell you how much you should have in the market.

    I ask about risk tolerance only to make the point that hypothetically losing half of your portfolio doesn't inspire the same fear that actually losing it will.

    Your investment strategy should instead be based on your goals, your time horizon and what you've saved so far. Success will come from sticking to your plan.

    But as you're learning now, buying stocks is emotional. Your investments represent security and freedom. And as you watch your balances decline, you see your dreams fade too. Hence the nervous calls.

    What I'm saying is that while I can't make any promises, I wouldn't bet against capitalism over the long run. Chances are, you'll look back and see that this was a buying opportunity.

    In times like these, you should push yourself to take more risk than feels comfortable. And in good times, go out on a limb less than you're inclined to.

    I'm feeling shock too. But I've bought more stock-index funds. It's scary, but it's also likely the right thing to do.

    The Mole is a certified financial planner and certified public accountant who - in the interest of fairness - thinks you should know what goes on behind the scenes in financial planning. Want to make contact? E-mail themole@moneymail.com.

    In times like these, you should push yourself to take more risk than feels comfortable. And in good times, go out on a limb less than you're inclined to.
    Mumbo Jumbo, or mumbojumbo, is an English phrase or expression that denotes a confusing or meaningless subject. It is often used as humorous expression of belief in something considered non-existent by the speaker (ghosts, supernatural phenomena, superstitious beliefs, etc.).

  • #2
    Re: Money Magazine: Why you should be buying stocks now

    IMO - the advice to be owning some best of breed blue chip stocks at these beaten down levels is by no means clearly a crappy idea. There are one or two highly reputable analysts calling for a historic bull market up ahead in the US indexes. Kickoff date is uncertain, but the window they are suggesting is within 24 months at the very outside, and likely a lot sooner than that.

    What this market decline is illustrating loud and clear, is that out of all iTulip's scenarios for markets returning to the mean, this trajectory is far and away the steepest and most abrupt down.

    What that spells out is that the bottom of the markets is not "out there somewhere" in 2012-2015. The correction has been the sharpest uninterrupted decline in 300 years of history. Your bottom is far closer by than the original iTulip estimates were plotting. Remember that iTulip's DOW collapse scenarios had three or four fan lines down. We are short-cutting the very briefest of those.

    Warren Buffet arguably has just as good a nose today for situational awareness as he's always had.

    Comment


    • #3
      Re: Money Magazine: Why you should be buying stocks now

      Originally posted by Lukester View Post
      IMO - the advice to be owning some best of breed blue chip stocks at these beaten down levels is by no means clearly a crappy idea. There are one or two highly reputable analysts calling for a historic bull market up ahead in the US indexes. Kickoff date is uncertain, but the window they are suggesting is within 24 months at the very outside, and likely a lot sooner than that.

      What this market decline is illustrating loud and clear, is that out of all iTulip's scenarios for markets returning to the mean, this trajectory is far and away the steepest and most abrupt down.

      What that spells out is that the bottom of the markets is not "out there somewhere" in 2012-2015. The correction has been the sharpest uninterrupted decline in 300 years of history. Your bottom is far closer by than the original iTulip estimates were plotting. Remember that iTulip's DOW collapse scenarios had three or four fan lines down. We are short-cutting the very briefest of those.

      Warren Buffet arguably has just as good a nose today for situational awareness as he's always had.
      The problem with this article is that it doesn't hit on any of that. The message that I'm receving is "don't worry, be happy, buy more chips." And considering the source, I think it is aimed at average Joe retail investors.

      Comment


      • #4
        Re: Money Magazine: Why you should be buying stocks now

        So many bullish comments today everywhere I go. Where is Fred to say we're shorting on Thursday !

        Comment


        • #5
          Re: Money Magazine: Why you should be buying stocks now

          Originally posted by Lukester View Post
          IMO - the advice to be owning some best of breed blue chip stocks at these beaten down levels is by no means clearly a crappy idea. There are one or two highly reputable analysts calling for a historic bull market up ahead in the US indexes. Kickoff date is uncertain, but the window they are suggesting is within 24 months at the very outside, and likely a lot sooner than that.

          When they say 'historic bull market', is that referring to a "Bull Market Rally" within the current bear market, or does it mean that the current bear market is over? Or thirdly, would it be a bull market in us indexes concurrent with the Debt Deflation Bear Market? If the latter, would that simply be an inverse to the drop in value of the dollar; as Marc Faber stated in the video interview recently posted here http://www.itulip.com/forums/showthread.php?t=6745. Stock Market up/Dollar down.... Stock Market down/Dollar up.?
          Last edited by rtchoke; December 03, 2008, 06:35 PM. Reason: Added link

          Comment


          • #6
            Re: Money Magazine: Why you should be buying stocks now

            I'm confused. It seemed on some of EJ's charts that we caught up with the Japan market decline. I know bottoms are ridiculous to call, but are we mildly bullish or bearish?

            Comment


            • #7
              Re: Money Magazine: Why you should be buying stocks now

              Historic bull market refers to a market run once the bear market is over. The inflation of the USD is certainly likely to be a large part of it. We can't have a bull market of any description in any sort of "deflation", hence if the bull market materialises it will be against an inflationary backdrop - which BTW most people around here agree is inevitably up ahead somewhere.

              Originally posted by rockyoyster View Post
              When they say 'historic bull market', is that referring to a "Bull Market Rally" within the current bear market, or does it mean that the current bear market is over? Or thirdly, would it be a bull market in us indexes concurrent with the Debt Deflation Bear Market? If the latter, would that simply be an inverse to the drop in value of the dollar; as Marc Faber stated in the video interview recently posted here http://www.itulip.com/forums/showthread.php?t=6745. Stock Market up/Dollar down.... Stock Market down/Dollar up.?

              Comment


              • #8
                Re: Money Magazine: Why you should be buying stocks now

                The hemorrhaging of jobs at an increasing rate is reason enough for me to stay out.

                When someone cites past performance and expects it to apply to our current circumstances, I assume it's because they couldn't find any fundamental data to support their otherwise frivolous claim.

                "What goes up must come down" works for physics, and only in one direction.

                Comment


                • #9
                  Re: Money Magazine: Why you should be buying stocks now

                  the best advice is to follow Faber and Janzen and then apply their predictions to your own strategy.

                  Comment


                  • #10
                    Re: Money Magazine: Why you should be buying stocks now

                    Originally posted by goadam1 View Post
                    I'm confused. It seemed on some of EJ's charts that we caught up with the Japan market decline. I know bottoms are ridiculous to call, but are we mildly bullish or bearish?
                    Bearish. We caught up with the first year of their "lost decade", and also just caught up with their 1991 bear rally. Next stop if we're tracking would be a Dow drop to below 6000 over the next year and a half.

                    18 years later, the NIKKEI is down 80% from its 1990 high.

                    Comment


                    • #11
                      Re: Money Magazine: Why you should be buying stocks now

                      Originally posted by goadam1 View Post
                      I'm confused. It seemed on some of EJ's charts that we caught up with the Japan market decline. I know bottoms are ridiculous to call, but are we mildly bullish or bearish?

                      EJ appears to be bearish as per his note that he was going short this week after being in cash for a while. Lukester has been introducing a lot of information that argues for a bull run of several months. Either way, it is probably best to go light and tight in this market or just sit it out.
                      Cowards die many times before their deaths; the valiant never taste of death but once.

                      Comment


                      • #12
                        Re: Money Magazine: Why you should be buying stocks now

                        Basil - I'm not really bullish with any of my own money here for going long. Buffett has the deep pockets. I sure as heck don't. I'm really just looking for selling opportunities and the upcoming relief rally will likely be complicated and treacherous. I own no stocks but a lot of bullion and I will be looking for some narrow "exit windows" to lighten up on some of that. But it's only because I own immoderately sized positions. "More than is good for me" - put it that way.

                        Originally posted by Basil View Post
                        EJ appears to be bearish as per his note that he was going short this week after being in cash for a while. Lukester has been introducing a lot of information that argues for a bull run of several months. Either way, it is probably best to go light and tight in this market or just sit it out.

                        Comment


                        • #13
                          Re: Money Magazine: Why you should be buying stocks now

                          Originally posted by Lukester View Post
                          IMO - the advice to be owning some best of breed blue chip stocks at these beaten down levels is by no means clearly a crappy idea. There are one or two highly reputable analysts calling for a historic bull market up ahead in the US indexes. Kickoff date is uncertain, but the window they are suggesting is within 24 months at the very outside, and likely a lot sooner than that.

                          What this market decline is illustrating loud and clear, is that out of all iTulip's scenarios for markets returning to the mean, this trajectory is far and away the steepest and most abrupt down.

                          What that spells out is that the bottom of the markets is not "out there somewhere" in 2012-2015. The correction has been the sharpest uninterrupted decline in 300 years of history. Your bottom is far closer by than the original iTulip estimates were plotting. Remember that iTulip's DOW collapse scenarios had three or four fan lines down. We are short-cutting the very briefest of those.

                          Warren Buffet arguably has just as good a nose today for situational awareness as he's always had.
                          The present circumstances are setting all sorts of new, and potentially new, records. For example, I heard a BBC commentator mention that if the BoE cuts it's administered rate below 1% in this cycle, that will become the lowest rate ever since the bank was formed in 1694.
                          Pound Weakens to All-Time Low Against Euro Before Rate Decision
                          Dec. 4 (Bloomberg) -- The pound fell to an all-time low against the euro and its weakest in more than six years versus the dollar before a meeting of the Bank of England at which it may cut interest rates to the lowest level since 1951...
                          So if this has been the sharpest uninterrupted decline in 300 years, could it not also end [eventually] with the biggest overshoot to the downside in 300 years? And maybe that slide is punctuated with the biggest bear market rally, ever? [then again, maybe the markets just collapse from here...yikes]

                          When everyone, and I mean everyone including me, stops looking for a bottom, stops trying to predict the next bull, and declares they will never, ever, ever buy another stock in their lifetime [and beyond ], then it might be time to "stir around in the ashes" for real bargains.

                          Edit added: At the moment I am still hearing too much "There's lots of cash on the sidelines waiting to be put to work", "The market will rally because the Fed is getting control of the long end of the T-bond curve", "The shorts have to cover", "The charts show it's risky to bet on anything other than up from here"...that sort of thing.
                          Last edited by GRG55; December 04, 2008, 08:50 AM.

                          Comment


                          • #14
                            Re: Money Magazine: Why you should be buying stocks now

                            Lukester,

                            Keep in mind Sir Warren bought a series of annuities with blue chip companies.

                            He didn't buy their common stock.

                            Hardly a bargain hunting, more like a 'Fat Tony' loan sharking.

                            Sir Warren just doesn't mind letting other people rise to their own wrong conclusions.

                            Comment


                            • #15
                              Re: Money Magazine: Why you should be buying stocks now

                              I did a 3 year subscription to Money two years ago and I can't even read it anymore without puking. Its the equivilant of a financial version of People magazine.

                              Comment

                              Working...
                              X