Did Value Investors Survive 1929-1932?

Quote from IShopAtPublix:

It has not dawned on some people that long term performance of US stock market had (*gasp*) something to do with US economic dominance during 20th century. During latter part of 19th century US was a rapidly industrializing power, during all of 20th century US was experiencing almost never ending periods of technological innovation (electricity on a large scale, telephones, automobiles, airplanes, satellites, transistors, PCs, internet, etc. That is not to mention the fact that Europe committed collective suicide during WWII (and WWI too)

US is a mature economy now and the relative economic position US occupied after WWII is not going to come back ever.

Furthermore, explosive growth for the US stock market can also be attributed to the rise of the scheme known as 401(k) which channeled US household wealth into the stock market.

Dow Jones did not recover its 1929 level until 1954! Nikkei is still going "strong" about avoiding its peak achieved in 1989.

If during a bull market a stock like Coca-Cola rises it surely must be because of "intrinsic value" not because a Bull Market lifts all boats. If it subsequently falls it must be because market is unreasonable.
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Indeed. Also, part of the problem Japan faced was an aging population that reached its stock purchasing peak. We are facing something similar on a larger scale. Unfortunately, I think this will apply to most stock markets over the next 15-20 years.
 
Quote from short&naked:

Indeed. Also, part of the problem Japan faced was an aging population that reached its stock purchasing peak. We are facing something similar on a larger scale. Unfortunately, I think this will apply to most stock markets over the next 15-20 years.
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At the end of the day, people need evaluate results and weigh it versus other options. The grand concept known as "opportunity cost". I could try to shovel money into a 401(k) and strive for the mythical 8% a year and lose "only" 20-30% for 2008 OR I could take matters into my own hands. Either way, my returns need to be weighed against "8%" a year. This (8% figure) is what I was taught in my college finance class.
 
Quote from IShopAtPublix:

At the end of the day, people need evaluate results and weigh it versus other options. The grand concept known as "opportunity cost". I could try to shovel money into a 401(k) and strive for the mythical 8% a year and lose "only" 20-30% for 2008 OR I could take matters into my own hands. Either way, my returns need to be weighed against "8%" a year. This (8% figure) is what I was taught in my college finance class.
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Sharpe ratios become a bit blurry with value investing. :D
 
Also, some addition thoughts.

In order to value invest you have to look at small/mid-cap stocks since these have the best chance of being mispriced (due in part to their low liquidity). However, just holding these kinds of securities presents new risks in a deflationary environment where default rates are higher among smaller companies.
 
Quote from short&naked:

Also, some addition thoughts.

In order to value invest you have to look at small/mid-cap stocks since these have the best chance of being mispriced (due in part to their low liquidity). However, just holding these kinds of securities presents new risks in a deflationary environment where default rates are higher among smaller companies.
More...

No, we should buy a "Large well capitalized company" (quote taken from the Intelligent Investor) just like AIG... :D
 
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