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Best strategy for long bear market 2010-2020
Bonds beat stocks by factor of 11 from 1981 to 2009, but can it continue?
By Paul B. Farrell, MarketWatch
Last update: 6:37 p.m. EDT April 13, 2009
ARROYO GRANDE, Calif. (MarketWatch) -- Never buy stocks. Never. Unless, of course, you love gambling (and losing) at the Wall Street casino. Or you don't mind making payments on your broker's BMW. Or you just joined a monastery and just took a vow of poverty.
Otherwise, don't buy. Stocks are losers.
At least that's the only rational investment strategy you'll come away with after reading economist and long-time Forbes columnist Gary Shilling's analysis of the miserable performance of stocks during Wall Street's recent bull/bear cycles, beginning with the election of President Reagan in the early 1980s.
And it gets worse when you project into the bear market predicted for the next decade, till 2020. Ergo, more tough times ahead for investors, possibly a sequel to the painful sideways bear of 1968-1982.
So I ask you: Knowing the history, why would anyone in their right mind invest in stocks? You'd be a fool, right?
Yes. But join the club. We are a nation of "those who cannot learn from history," as the philosopher George Santayana once warned, so we "are doomed to repeat it."
Statistics prove that year after year America's 95 million investors are indeed clueless fools, easily conned into buying stocks by what BusinessWeek once called the "Wall Street Hype Machine."
We never learn, no matter how painful the losses, we just keep repeating the same old mistakes, over and over, forever falling under Wall Street's magical spells.
Admit it: We've become the laughingstock of history. Wall Street's giants were bankrupt, in fact and morally. In reality, they were nationalized. Their bosses are arrogant, greedy and incompetent. All should have been fired. Yet we were stupid enough to give them $2.2 trillion in tax dollars to bail themselves out.
Want more proof? Here's how easy it is for Wall Street to scam you, year after year:
Bonds beat stocks by factor of 11 times from 1981 to 2009.
Yes, and you'd have been 11 times richer.
Listen closely to Shilling's analysis of the past 28 years. In his Insight newsletter he compares the performance of the S&P 500 stock index to the bond market.
First he focuses on his "all-time favorite graph" comparing "the results from investing $100 in a 25-year zero-coupon Treasury bond at its yield high (and price low) in October 1981, and rolling it into another 25-year Treasury annually to maintain that 25-year maturity."
His bottom line: "On March 31, 2009, that $100 was worth $16,656 with a compound annual return of 20.4%.
In contrast, $100 invested in the S&P 500 at its low in July 1982 was worth $1,502 last month for a 10.7% annual return including dividend reinvestment. So Treasurys outperformed stocks by 11.1 times."
Never heard of this fabulous alternative? Of course not. Wall Street can't make millions in commissions this way. Instead, during this same 28-year period, Wall Street was using high-pressure sales gimmicks to sell its losers to America's 95 million vulnerable investors.
Imagine: If you were in your 20s and just out of college back in 1981, and you started adding a hundred more bucks each and every month using Shilling's zero-coupon strategy, you'd be enjoying early retirement today, instead of crying because your retirement stocks lost half their value.
Shilling adds a word of caution about the future: "We've had been recommending long Treasury bonds since 1981. Back then, we forecast secular and huge declines in inflation and interest rates. So we declared that 'we're entering the bond rally of a lifetime.' Unfortunately, that rally is over." We need new strategies.
Stocks lost over two-thirds in the last decade.
We've also been writing about the absurdity of trading and investing in stocks for a long time. Back in mid-2008 when the DJIA fell below its 2000 high (11,722) it was obvious to investors that their portfolios had flat lined for eight years. Yes, zero returns on your portfolios for eight years. And it's worse when you deduct fees, commissions, taxes and account for inflation: Most portfolios lost over 65% of their value since 2000.
Yet, while Main Street investors were being scammed, Wall Street bankers were paying themselves huge megamillions in salaries plus $36 billion annual bonuses to their staffs for selling us their loser stocks. In 2006 during his last year as CEO of Goldman Sachs, former Treasury Secretary Hank Paulson added $38 million to his half-billion fortune.
Yes folks, Wall Street's business model is still "greed is good," a license to steal your retirement money. And Congress supports their crooked ways (thanks to Wall Street's lobbyists). They're "stealing" from you, always have been, always will -- and given what's happening with the Fed, Treasury, Congress and the White House, it is guaranteed to get worse in the years to come.
So I ask you again: Why would you ever invest in stocks?
-CONTINUED BELOW-
Best strategy for long bear market 2010-2020
Bonds beat stocks by factor of 11 from 1981 to 2009, but can it continue?
By Paul B. Farrell, MarketWatch
Last update: 6:37 p.m. EDT April 13, 2009
ARROYO GRANDE, Calif. (MarketWatch) -- Never buy stocks. Never. Unless, of course, you love gambling (and losing) at the Wall Street casino. Or you don't mind making payments on your broker's BMW. Or you just joined a monastery and just took a vow of poverty.
Otherwise, don't buy. Stocks are losers.
At least that's the only rational investment strategy you'll come away with after reading economist and long-time Forbes columnist Gary Shilling's analysis of the miserable performance of stocks during Wall Street's recent bull/bear cycles, beginning with the election of President Reagan in the early 1980s.
And it gets worse when you project into the bear market predicted for the next decade, till 2020. Ergo, more tough times ahead for investors, possibly a sequel to the painful sideways bear of 1968-1982.
So I ask you: Knowing the history, why would anyone in their right mind invest in stocks? You'd be a fool, right?
Yes. But join the club. We are a nation of "those who cannot learn from history," as the philosopher George Santayana once warned, so we "are doomed to repeat it."
Statistics prove that year after year America's 95 million investors are indeed clueless fools, easily conned into buying stocks by what BusinessWeek once called the "Wall Street Hype Machine."
We never learn, no matter how painful the losses, we just keep repeating the same old mistakes, over and over, forever falling under Wall Street's magical spells.
Admit it: We've become the laughingstock of history. Wall Street's giants were bankrupt, in fact and morally. In reality, they were nationalized. Their bosses are arrogant, greedy and incompetent. All should have been fired. Yet we were stupid enough to give them $2.2 trillion in tax dollars to bail themselves out.
Want more proof? Here's how easy it is for Wall Street to scam you, year after year:
Bonds beat stocks by factor of 11 times from 1981 to 2009.
Yes, and you'd have been 11 times richer.
Listen closely to Shilling's analysis of the past 28 years. In his Insight newsletter he compares the performance of the S&P 500 stock index to the bond market.
First he focuses on his "all-time favorite graph" comparing "the results from investing $100 in a 25-year zero-coupon Treasury bond at its yield high (and price low) in October 1981, and rolling it into another 25-year Treasury annually to maintain that 25-year maturity."
His bottom line: "On March 31, 2009, that $100 was worth $16,656 with a compound annual return of 20.4%.
In contrast, $100 invested in the S&P 500 at its low in July 1982 was worth $1,502 last month for a 10.7% annual return including dividend reinvestment. So Treasurys outperformed stocks by 11.1 times."
Never heard of this fabulous alternative? Of course not. Wall Street can't make millions in commissions this way. Instead, during this same 28-year period, Wall Street was using high-pressure sales gimmicks to sell its losers to America's 95 million vulnerable investors.
Imagine: If you were in your 20s and just out of college back in 1981, and you started adding a hundred more bucks each and every month using Shilling's zero-coupon strategy, you'd be enjoying early retirement today, instead of crying because your retirement stocks lost half their value.
Shilling adds a word of caution about the future: "We've had been recommending long Treasury bonds since 1981. Back then, we forecast secular and huge declines in inflation and interest rates. So we declared that 'we're entering the bond rally of a lifetime.' Unfortunately, that rally is over." We need new strategies.
Stocks lost over two-thirds in the last decade.
We've also been writing about the absurdity of trading and investing in stocks for a long time. Back in mid-2008 when the DJIA fell below its 2000 high (11,722) it was obvious to investors that their portfolios had flat lined for eight years. Yes, zero returns on your portfolios for eight years. And it's worse when you deduct fees, commissions, taxes and account for inflation: Most portfolios lost over 65% of their value since 2000.
Yet, while Main Street investors were being scammed, Wall Street bankers were paying themselves huge megamillions in salaries plus $36 billion annual bonuses to their staffs for selling us their loser stocks. In 2006 during his last year as CEO of Goldman Sachs, former Treasury Secretary Hank Paulson added $38 million to his half-billion fortune.
Yes folks, Wall Street's business model is still "greed is good," a license to steal your retirement money. And Congress supports their crooked ways (thanks to Wall Street's lobbyists). They're "stealing" from you, always have been, always will -- and given what's happening with the Fed, Treasury, Congress and the White House, it is guaranteed to get worse in the years to come.
So I ask you again: Why would you ever invest in stocks?
-CONTINUED BELOW-
