Post of the Day
July 30, 1999
Dell Computer Folder
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I turned into a bear.
Always respectful of a well-supported position, I merely disagree with your fear of what I assume is a supposed crash based on your criteria.
1. Since 1997, Nasdaq volume is up 55% and now averages over a billion shares per day. Since 1994, the volume increased by 242%, with an average daily volume of 470 million.
Does the fact that more people are trading portend a crash? Maybe, if folks are likely to sell in a panic. The large volume could also suggest that more money is being put into the market because of factors such as: a. The increase in use of IRAs, including Roth IRAs, 401k plans, SEP IRA, and so on as investment vehicles for stocks instead of money market or bonds, b. The dramatic decrease in brokers fees making it more cost effective to trade or buy odd lots, c. The low unemployment rate, which means more people don't fear for their jobs and are willing to increase investments.
2. Day traders represent 15% of the daily Nasdaq volume.
This also means that 85% of the volume is long or intermediate term. Take the day trading of microcaps out, and you are necessarily at less than 15%. Also, I do not see why day traders necessarily portend a crash, unless you count their willingness to go to cash easily....which would also mean they would be on the sidelines, ready to buy, right?
3. The hottest and highest priced stocks are those that tend to have no intrinsic value. Their lofty prices are the stuff of excessive optimist, speculation, and the Greater Fool Theory.
Stocks have absolutely zero intrinsic value. Every one of them. A stock certificate is a piece of paper representing an ownership interest in a company, and theoretically represents a share in the value of all assets when sold after debts are paid. Realistically, this never would happen to GE, JPM, or DELL. Stocks are in demand because they are in demand...this has always been the case. By the way, T-Bills, US Dollars, Yen and Marks also have no intrinsic value.
4. For every dollar invested in the economy, as measured by the Gross Domestic Product (GDP), $2.08 is going into the stock market. This is a clear sign of excessive speculation.
Not necessarily. Lots of money used by US companies go towards overseas expansion, right? Again, remember that pension funds and retirement funds are quite a big part of the investments....this bodes well, not ill, for our people in the future it seems to me.
5. College students are trading from their dorm rooms, mothers from the kitchen table, stock split speculators carry dedicated pagers that beeps on split rumors, and a brokerage ad campaign depicts a garbage truck driver as owning a Caribbean island because of his stock market gains. You can find many more examples of this new breed of savvy online traders. An old, established rule of thumb states that when the public becomes overly active in the stock market, it is time to stand aside.
Again, I respectfully disagree. The fact that there are folks considered ignorant by the truly gifted who dare to invest on their own is again a good thing. The Fools are absolutely right when they encourage people to invest for themselves. As far as the day traders (already stated as 15% of the market, max)they are gambling, true. But aren't they mostly buying and selling against each other?
Another point, is that if a person loses money or makes money when investing for themselves, they have only themselves to blame or congratulate. It isn't the brilliance of a broker, or the con job of the snake oil salesman...it is the personal responsibility of the individual. In modern society, it is refreshing.
6. Unqualified investors are also flocking to the options market with the hopes of making a quick killing. Unless options are used to hedge one's portfolio, it is speculation, pure and simple. While you can include me in that group, it's taken me 8 months to gain the confidence to move from Level 1 trading to Level 2 (covered calls to spreads and hedges).
Option trading is risky, but again, why does it portend a crash? How many folks actually make a quick killing in options? I have been studying the market, as a rank beginner, for around a year. Haven't bought an option yet cause I still don't know enough IMHO. Hmm....option use is up, and Vegas gambling profits are down...wonder if there is a correlation?
7. The speculative bubble argument has many historical precedents where unabashed greed laid waste to government treasuries and personal fortunes. Some 20th century examples include the Florida Land Grab of the early 1920s, the Crash of 1929, the Oil Boom of the late 1970s, and, several years ago the pyramid scheme that bankrupted the people and government of Albania. It is reasonably argued that the 1990's stock market is another case of rank speculation getting completely out of hand.
The stock market is not a pyramid scheme like the Albanian crisis, nor is it driven up in price by limits on production like OPEC did to oil in the late 70's. The Crash of 29 may be a valid comparision, however. I just believe that our checks and balances against that type of a massive depression are sufficient to prevent it. Folks, the US is the only superpower left....that carries some weight. The Dollar may become currency for other countries, because of the strength of the US economy. Depression? Possible, but doubtful.
Another advantage that folks have is seen right here, on the internet. In 1929, stock con jobs were commonplace. Now, a diligent investor can find piles of information on just about any stock with a few mouse clicks. I think fraud will be a lot harder to pull off nowadays.
8. The advantages of LTHB are being ignored. Over five years, LTHB has a definite advantage over day trading. In twenty years, the advantage of LTBH is insurmountable.
With all due respect, me bruddah...by going to cash, aren't you ignoring the benefits of LTBH? *grin*
I think lots of folks have LTBH stock....even day traders. Matter of fact, I don't know anyone who goes to 100% cash every day...I guess they exist, maybe they do well. But I have never met a single one.
It certainly doesn't hurt to hold cash. Matter of fact, if owning stocks gives you indigestion, you shouldn't own any. On the other hand, if you don't mind taking risks...and we all take risks every day in everything we do...then the market is a rational place to put ones money.
Oh, and of course, GO DELL!!!!!!!