The Worst Investment in 50 Years

It isn't every day that you're able to lock in a decade's worth of below-inflation, market-lagging returns. Nor would you want to, right?

You'd think. But like moths to a flame, shaken investors the world over are piling into two of the most blatantly poor long-run investment opportunities of our lifetime: cash and U.S. Treasuries. If you're thinking of selling out of the market and socking your dough in the bank or a trusty Treasury, I beg you to reconsider.

Here's why
Now more than ever, we don't know what we don't know about the market's future. But there are a few things we do know.

  • Last year was the worst for the U.S. stock market since 1937.
  • The dividend yield on the S&P 500 is at 3.0% -- in the realm of a 16-year high.
  • The benchmark 10-year U.S. Treasury bond, meanwhile, currently yields 2.38% -- near a 50-year low.

That's right: The dividend yield on the S&P 500 now exceeds that of the 10-year Treasury bond. Based on data I've collected, this is the first time this has happened in at least 20 years. And here's something else we know: The stock market tends to boom for seven years following a period when dividend yields are high, according to the University of Chicago's John Cochrane.

Do the math
Prices are down. Yields are up. Rates are low. Look, it doesn't take a market guru to see the opportunity here. For the long-run investor, the stock market is stupid cheap right now. Former highfliers Google (Nasdaq: GOOG  ) and PotashCorp (NYSE: POT  ) , both of which sport meaningful competitive advantages, have been beaten down to the point that even this curmudgeonly investor is kicking their tires. Meanwhile, staid dividend payers from Yum! Brands (NYSE: YUM  ) to Chevron (NYSE: CVX  ) sit like fish in a barrel for the long-term investor.

Indeed, these beaten-down dividend dealers have caught my interest for two reasons. First, because you're currently able to gobble up blue-ribbon stocks at flea market prices. And second, because dividend-paying stocks offer the best of both worlds: Not only are they less volatile, but according to Dr. Jeremy Siegel, portfolios invested in the highest-yielding S&P 500 stocks outperformed portfolios in the lowest-yielding by almost five percentage points a year from 1957 through 2003.

Dividends ... on steroids
But despite the obvious potential for long-run investors right now, investors shockingly continue to flock to mattress-yielding Treasuries and money-market accounts. To the fear-stricken investor who has been crushed this past year, the 0.6% higher yield the S&P 500 offers above the 10-year Treasury isn't all that impressive.

If you spread that 0.6% across 10 years, though, the cumulative difference is massive. That difference is magnified even further when you start looking at individual blue chips.

Let's compare how these results shake out over a 10-year period. Take a gander at the last column:

Investment

Initial Investment

Yield

Ending Cash

Cumulative Return

Relative Return vs. 10-Year Treasury Bond

10-Year Treasury Bond

 $10,000

2.4%

$12,380

23.8%

N/A

S&P 500

 $10,000

3.0%

$12,980

29.8%

1.3 times

Coca-Cola (NYSE: KO  )

 $10,000

3.4%

$13,358

33.6%

1.4 times

Kraft Foods (NYSE: KFT  )

 $10,000

4.3%

$14,320

43.2%

1.8 times

Paychex (Nasdaq: PAYX  )

 $10,000

4.7%

$14,718

47.2%

2.0 times

Yield data as of Jan. 4, 2009.

If you put your money in the 10-year Treasury right now, you'd earn a cumulative 23.8% on your investment -- the worst return you'd get on those bonds in 50 years. If you roll the S&P 500 route, however, your payback from dividend checks is likely to be at least 1.3 times higher over the same period. Income Investor core recommendation Paychex? Twice the return of the 10-year.

Incredibly, that's the conservative scenario. When you buy a bond and hold it to maturity, you're stuck with that same subpar yield for the entirety of your purchase. With blue-chip dividend payers, though, you can count on your dividends to rise at a fairly steady clip each year.

Let's look at these same returns, only assuming the S&P 500 and the other blue chippers on this list are able to grow their dividends at just one-third of their growth over the past five years.

Investment

Initial Investment

Yield

Ending Cash

Cumulative Return

Dividend Growth Rate

Relative Return vs. 10-Year Treasury Bond

10-Year Treasury

 $  10,000

2.4%

 $12,380

23.8%

0.0%

N/A

S&P 500

 $  10,000

3.0%

 $13,238

32.4%

1.8%

1.4

Coca-Cola 

 $  10,000

3.4%

 $13,998

40.0%

3.8%

1.7

Kraft Foods 

 $  10,000

4.3%

 $15,170

51.7%

3.9%

2.2

Paychex 

 $  10,000

4.7%

 $16,631

66.3%

7.4%

2.8

Yield data as of Jan. 4, 2009.

By factoring in some conservative dividend growth assumptions, the relative returns on dividend-paying stocks practically explode. Paychex's expected cash return against the 10-year Treasury, for example, rises 40% to nearly triple that of the bond.

But here's the kicker: The returns on those stocks assumes no capital gains whatsoever.

After having watched the market fall 34% in a year, are we really to believe that shares of first-rate stocks won't rise over the next decade? If you truly believe they won't, I suggest selling your stocks and investing in a shotgun, seeds, and some canned goods.  

It really is that simple
So, let's sum all this up:

  • Most signs point to this being an outstanding time to be buying stocks.
  • The common alternatives to holding stocks -- cash and Treasuries -- are yielding far less than their dividend-paying peers.
  • Dividend-paying stocks vastly outperform non-dividend payers over the long haul.

To me, all signs point to blue chip dividend payers right now. That's why I've been loading up on them in my personal portfolio -- including Paychex. And that's also why James Early and I are practically salivating over at Income Investor, the Fool's market-beating dividend-focused newsletter service. Our members gain access to our top dividend-paying stock ideas, weekly company updates, and a new research report and stock idea each month. You can kick the tires on us and our service free for 30 days.

Joe Magyer owns shares of Paychex, which is a recommendation of both Inside Value and Income Investor. Joe does not own shares of any other companies mentioned in this article. Google is a Rule Breakers recommendation, Coca-Cola is an Inside Value recommendation, and Kraft is an Income Investor recommendation. The Motley Fool has a disclosure policy.


Read/Post Comments (96) | Recommend This Article (337)

Comments from our Foolish Readers

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  • Report this Comment On January 12, 2009, at 5:07 PM, YRDOG wrote:

    Well ,let me see, anyone can cherry pick a 10 year period. Lets try 1929 to 1939, not so good. Or try 1968 to 1978, not so good. Even 1998 to 2008 is not so good for SP 500. If the Dow ends up at 4200 by the end of 2009, your advice will look like it came from a moron. To say that stocks are cheap right now is assuming that capitialism will work like it did for the last 30 years, and I would say that is less than a 50-50 bet right now. Buy up all the stocks in sight right now and you will either look like Warren Buffet or a Carlos Menchia Dee-Dee-Dee . Good luck

  • Report this Comment On January 12, 2009, at 5:15 PM, PressClub wrote:

    Your points are well taken, however the masses are really frightened right now (I'm one of the masses) over the news and events of the past few months.

    Some of our business and government leaders have recently done quite a bit to hurt trust. The entire financial system is largely based upon trust. That trust has been seriously compromised in the minds of more than a few folks because of a litany of bad news which has bombarded people over the past three months. The ensuing shutoff of funds just destroyed one of the companies I work with and that just makes the problem worse as record numbers of folks lose jobs and fall deeper into despair.

    When one has seen the value of their investments cut in half or more in only a couple of months and their jobs either on the line or gone, the returns from investments which are backed by the full faith and credit of the US government understandably start to look pretty good.

    Perhaps bargains are indeed out there, but perhaps the sheep are also a bit worried about getting shaved further. I think that it may take time for some folks to regain trust and really believe there are no more shoes in the air just waiting to drop.

    And during all of this, you will almost certainly see less reputable folks coming out of the closet to push this deal or that deal to their own benefit and not that of the prospective investor (think pump and dump scams). Having those activities occur also does nothing to boost investor confidence because the very markets that are seeking trust facilitate those very activities.

    There is no easy answer.

  • Report this Comment On January 12, 2009, at 5:54 PM, jeffduby wrote:

    Unfortunately, when earnings for 2008 finish coming in, the p/e ratios are going to be right where they are supposed to be. It is also likely that as earnings and profits drop that dividends are likely to be slashed. There go two out of your three arguments. Just because the market had one of the worst years ever doesn't mean it there can't be two consecutively bad years. That is the same as telling your son that just got hit by a car to go play on the freeway "because the odds are so low"

    Experts all over the world are saying that there is plenty of opportunity in short term trading, but the long term picture is a horror show. Unfortunately, the type of investor that will listen to your advice does not have the skill to day trade and will be massacred.

    There is absolutely nothing wrong with sitting on the sidelines until the economy starts to recover. You might do well to see what the top fools are saying before writing this kind of advice, because it simply not matching up.

  • Report this Comment On January 12, 2009, at 6:23 PM, olderdoc wrote:

    Hopefully we will have enough of the population employed so that everyone can afford to feed their families. The degree of leverage and speculation has been so high, that things may get worse. All this being said if you want to bet, take your chances.

  • Report this Comment On January 12, 2009, at 6:29 PM, SREG wrote:

    I have to laugh at the TMF drum beat to buy now. There will be plenty of time to buy. The market is not going anywhere soon.

  • Report this Comment On January 12, 2009, at 6:31 PM, falang1 wrote:

    Yes, dividends are above 3%, but that used to be a SELL point for stocks, not a buy point. Real historic dividends for the DOW are between 3-6%. This is pre-Greenspan/Bernake. You would have to get to 6% to mark a true buy point, which is DOW 5,000 or so. And of course this is hard to track because of dividends being cut. I wouldn't buy a dividend payer below 6%.

  • Report this Comment On January 12, 2009, at 6:53 PM, mark698 wrote:

    Your catchy blurb "Worst Investment in 50 Years" got me to open your advertisment because I thought you were going to discuss your June 2007 Stock Advisor pick Satyam, but once again I was disappointed, just as with the recommendation.

    The best way to make money in the market is still selling advice on how to make money in the market.

  • Report this Comment On January 12, 2009, at 7:41 PM, ds10 wrote:

    Thanks, but I will definitely pass on your advice.

    Dividend yields are high only because stock prices

    are so hideously low---and will most likely remain

    this way for quite some time to come.

    I will take my bank's CD rate of about 3%. And this is a far safer investment than purchasing stock. There's no way of knowing which companies will make it back safely to normal times and which will falter and fail. And of those who make it back, the big question is WHEN?

    And the even bigger question is what will "normal" times look like as the future unfolds. Right now, the

    odds look slim that we will see the market Golden Days of the past decade.

    The legions of small banks that did not fall into the sub-prime debacle are the safest places to be until

    this nightmare subsides.

  • Report this Comment On January 12, 2009, at 7:46 PM, Gak93 wrote:

    You make the (wrong) assumption that the money in US Treasuries right now is going to stay there for 10 years. It isn't. When governments get *overly* manipulative of markets (like we are seeing now in spades) then the smart money gets out of the way until markets are allowed to price themselves correctly. That hasn't happened yet, and unfortunately, it looks like Obama has fallen for the same Treasury/Fed Siren song that Bush fell for.

    Too bad.

  • Report this Comment On January 12, 2009, at 9:22 PM, bigdividends wrote:

    Here is my two rules for dividend play.

    1) find a company that has a history of distributing and raising their dividends

    2) invest in companies where the dividends are safe.

    The problem in this market is that it is difficult to determine which dividend is safe. Companies future EPS are are getting slammed and that puts alot of these dividends into question. If a company is paying out more than 50% EPS on their dividends (excluding REITS and other companies where payouts are required), there is a good chance that dividend is going to be slashed. Slashed dividends are a nightmare for dividend players.

    Three areas that I would be extremely weary of investing for dividends are financials, retail and emerging markets. Players like JNJ are still solid plays along with PM. Home Depot is one of my few retail plays for dividends (almost 4% and fairly safe).

    Dividend stocks are a great way to build a portfolio. But in these times, do your homework because what might look like a sweet dividend is an implosion ready to happen (AKA citigroup).

  • Report this Comment On January 12, 2009, at 10:49 PM, steveherb wrote:

    Agree. The trust is gone. The best bet is some seeds and some canned goods. You can keep the gun.

  • Report this Comment On January 12, 2009, at 11:51 PM, dgmennie wrote:

    Yes, The Fool's "experts" seem to consistently predict the bottom is at hand when, in fact, nobody really knows what the stock market will do. There is precious little discussion here of bonds, especially municipals, as an alternative. Could it be The Fool "experts" do not like (or do not understand) any investment strategy that does not generate a big steady stream of comissions for stockbrokers?

    How is the small investor helped by this kind of advice? I think we all know the answer to this one.

    Good luck out there. If we go by past performance it could easily take 10-20 years for the S&P index to regain what it has lost over just the past few months, let alone move on to higher ground. Where is the profit in this scenario for the untold millions of little guys with IRAs, index funds, and other "safe" investments ALREADY down 40 oercent or more and bleeding badly?

    Oh sure, Obama is going to print up enough money for everybody and send us all a check. Right!

    Next stop, Argintina.

  • Report this Comment On January 13, 2009, at 10:47 AM, theplater wrote:

    One problem with this assesment is that it is calculating the yield with past dividend data, whilst this might work when yesterdays profits are similar to tommorows in extreme market events like the one we are currently in, it is floored.

    Also the current prices of junk bonds suggest an annualised default rate of 20% the great depression was 16%!!!

    Now maybe the market has got it wrong, won't be the first time, but anyone wanting to invest shouldn't just look at the past yield but should carefully consider the stability of the company and the new business enviroment that is appearing.

  • Report this Comment On January 13, 2009, at 11:53 AM, TMFTheDoctor wrote:

    I can't find the Smartmoney article I first saw this in, but this is pretty much the same: http://bit.ly/Vw29. While T-Bills are pathetically low right now, the spread is incredible high. Corporate bonds are reaching 8, 9, even 10%. Of course, you have to have faith that the company won't default, but I find it hard to believe someone like Pepsi would go bankrupt.*

    *granted, the same was said about most everyone else last year

  • Report this Comment On January 13, 2009, at 12:49 PM, jreno wrote:

    With all this negativity, why bother to read finance articles in the first place.

    Nothing is certain, but intelligent, pro-active ideas can help get us out of this mess.

    Keep the faith baby--our resourceful, mighty U.S. engine will come to the rescue.

    JohnR

  • Report this Comment On January 13, 2009, at 1:45 PM, sperson wrote:

    Jeez, if doom and gloom by everyone is a sign of a market bottom, the previous comments add up to a screaming buy.

  • Report this Comment On January 14, 2009, at 5:49 AM, wuff3t wrote:

    "If the Dow ends up at 4200 by the end of 2009, your advice will look like it came from a moron."

    Why? TMF advocate holding for at least 3-5 years, so where the Dow stands one year from now is not a relevant benchmark. I'd be quite happy for the markets (and therefore my entire, current portfolio) to go even lower this year, as this means I will have the opportunity to buy even more companies at low prices. My biggest fear is that the next bull market will start too soon, before I have time to raise some cash and buy more! Quite honestly I get depressed when the market opens and I see it going higher. I want more low prices!

    "Yes, The Fool's "experts" seem to consistently predict the bottom is at hand when, in fact, nobody really knows what the stock market will do."

    TMF writers are very conscientious about not predicting market bottoms, and rightly claim that nobody can do that. The author is simply stating that prices are very low right now and represent a great opportunity. Is he wrong? Would we prefer to pay higher prices for the stocks we buy?

    "Jeez, if doom and gloom by everyone is a sign of a market bottom, the previous comments add up to a screaming buy."

    Well said!

  • Report this Comment On January 14, 2009, at 5:32 PM, bbldundee wrote:

    "Fools", hummmm. Has many connotations. If you keep in mind that most of the market money was, in the "good 'ol days", held by we little blokes via mutuals etc. then the sentiments above are mostly bone-chilling. Nobody is going anywhere near the markets i.e. no rebound, no investment in those heady dividends you're talking about so good-bye companies no matter what their yield - and good-bye your heartfelt advice. As you can see we're all beyond "expert" advice by now. My "expert" cost me 45% in the last fifteen months - after three arguments to "get out" starting Dec. 2007. Why do we think because we're paying 1+% or see it on the internet or in a "service" that the purveyors are smarter than we are? "We" (see above)ARE the market. As for the dividends? In this market - fools gold. You configure the connotation.

  • Report this Comment On January 14, 2009, at 5:51 PM, thedofca100 wrote:

    What I love most about this column are the comments that follow. People have finally woken up to the disaster that is happening, and how anyone can cherry pick certain time periods and certain businesses. If you know for sure which one of the still existing companies out there are going to be here in five years then it probably is a good time to buy and take the dividends. I tried this in the dot com bust. I picked wrong. Probably so will you.

  • Report this Comment On January 15, 2009, at 7:14 AM, brwn8484 wrote:

    This blog looks hauntingly similar to all other MF blogs I have been following. Someone touts a great stock which will supposedly make you a millionaire (he he) within xx number of years. And this stock is the the only one that will go up because (he he) the author knows that Industry yy will explode over next year.

    The only problem with this method of stock picking is that most stocks move with the market. And most stocks dont outperform the market averages. And unless we fix the giant Ponzi schemes called

    TARP and

    Social (in)Security and

    Medicare and

    Socialized Health Care and

    and Unless we fix following behavior:

    Criminal behavior of politicians and wall street and

    Criminal behavior of Insurance co's

    Criminal behavior of Business Leaders and

    Criminal behavior of Credit rating entities and

    Criminal behavior of investment companies and

    Criminal behavior of average joe

    and unless the entire market somehow believes that all the problems listed above are fixed, the average stock pick in any MF blog will continue to fall along with the general market.

    I believe that we can fix this problem, but not a single politician or biz leader or wall street fat cat or anyone else has lifted a finger to solve any of these problems. We as a nation need to see ALL the ring leaders of this mess taken to task and charged with criminal behavior. After all no society (or financial system) has ever survived when its members have practiced blatantly criminal behavior. And lets face the facts.... None of our leaders has made any attempt to reign in any of this Immoral behavior. Unless you live under a rock, you know about all the criminal behavior.... So why is no one being held accountable? Go figure. You are better off staying on the sidelines until our leaders wake up and go after real ringleaders of this mess.

  • Report this Comment On January 15, 2009, at 1:46 PM, trenton1ryan wrote:

    <leaders wake up and go after real ringleaders of this mess>

    Yes, but the problem lies in the fact that the ringleaders are also the leaders.

    Right now, services like TMF are just servicing the brokers. For all of you out there concerned that you'll miss the next bull market, take heart. It will be quite a long time before anything resembling quite a bull market occurs again-at least in the U.S. Deleveraging is not finished, nor is the damage from it done (not even close). The whole landscape is changing right before our eyes. In fact, there is even a cultural shift occurring. We are being forced to abandon our old spending behavior and go back to being savers. In the short term, it exacerbates the problem. But collectively deciding to invest in securitized mortgages was one of the dumbest (second to dumping loans on people who obviously were going to default) financial decisions ever made. Now, we all pay the price for it. And it's going to take time-A LOT of time. There will be plenty of time to buy good companies at firesale prices. Unfortunately, some of those so-called good companies will not make it through all this.

    Hell, even B of A overextended, and one bailout isn't even enough. It will be surreal if they were to end up being so bad off that they were 'taken in' by the gov't. Scary times indeed. Keep a close eye on what money you have left. And watch gold and silver. They're not done yet imo.

  • Report this Comment On January 15, 2009, at 4:08 PM, JCOTTERT wrote:

    As an addendum to Brwn8484 just consider the appointments by B.O> and the response by politicians when the dishonesty of these guys is pointed out. Party leaders are shameless and why should Wall Street and others be cleaned out when our elected representatives are at least as bad? Just a thought!

  • Report this Comment On January 15, 2009, at 11:46 PM, courtneTHEgreat wrote:

    It is Thursday night, 1/15... the DOW has dropped from 9000 to 8000 with a support at 7500. Sure stocks look cheap. If India, Brazil, China did not exist for the job market, I would say sure... the stocks will rebound soon. BUT, that is not the case. We need to fix a lot of stuff before we can see stability. So, I buy as you suggest and support my purchase with a CALL or a PUT option. DUK yielding 6% moves from 14.5 to 16. So buy a CALL at 14 and ride it up to 16... take the profit and buy more common stock. Then ride the stock down with a PUT and take the profit at 14. Why would a good stock go down? Market pressures. So after this earnings season, DUK will return to 16. Big question: when will this crazy market stabilize? BofA is now in the news... Great!

  • Report this Comment On January 16, 2009, at 12:24 PM, joeCLC9 wrote:

    This country is hitting more than just a financial wall; there are also climate and ecological problems with consequences. Assuming the next 30-50 years are going to be like the past 30-50 years, is just naive. The problems we are facing with our ecosystems also have dramatic effects on our economy. The collapse of Pacific salmon, Hurricane Ike, extreme cold weather...the list goes on. Now, I'm sure companies and industries will find ways to make money regardless of our circumstances, but the blind regard for the past...and the assumption that the future will be like the past...is just stupid. I think we should start with a government and people who are interested in TRUTH and JUSTICE. Enforcing the law will go a long way to reversing the spiral we have gotten ourselves into.

  • Report this Comment On January 16, 2009, at 1:15 PM, freddyv3 wrote:

    REAL DATA:

    We are in a deflational spiral similar to the Great Depression

    We have a terrible outlook for economic growth because of demographics. This will last for at least two decades and can't be changed or fixed.

    We have two decades worth of excess to work off and it won't happen in a year or two.

    The stock marke tis not underpriced based on long-term valuations. P/E ratios are still high and book value and dividends are normal and should be expected to overcorrect as happens in every bursting of a bubble, especially when you consider that our economy is shrinking and will likely frow very slowly once it does recover.

    Please look at long term valuations and consider that the housing market and debt situations are far from being resolved before you go long this market. Once even the fools are bearish...that is the time to buy.

    --Fred

  • Report this Comment On January 16, 2009, at 1:21 PM, TShafovaloff wrote:

    Why not mention that if there is a significant devaluation of the dollar, because of the globalization of the equity markets, the "dollar value" of the equity should go up but the Treasuries will remain pegged to the dollar's prior value. Of course there are those that argue that foreign currencies will devalue at the same time but in my estimation the "dollar" is at a greater disadvantage when it comes to devaluation.

    Now is the time to fix your German car, the damaged Spanish tiles on your roof and invest in a mix of foreign companies. Even Alan Greenspan keeps a foreign diversified portfolio or so he did.

    Best of luck to everyone.

    Tom S.

  • Report this Comment On January 16, 2009, at 1:27 PM, graybear9 wrote:

    it's all true, things can get worse ... or better. But there is a thing that should be considered, what is a stock ... it's a piece of a company. Now if really big companies will go down to nothing as far as value I think there will be no reason to worry about that : all of us will be around, hunting, fishing, trying to put together some food, and we will have other problems, quite simpler.

  • Report this Comment On January 16, 2009, at 1:48 PM, ESPFS wrote:

    The current market puzzle isn't as difficult to understand as many (TMF) wish it were. Brokers want us to stay in and spend, and investors unaware of the pending second wave of the original (40% portfolio losses) financial tropical storm to hit us by mid 2009-2010 should make most a bit frightened of any movement one way or the other. My prediction is that we are headed for a very difficult time in our economy that will last thru 2012. Anyone thinking that buy and hold or divesification will cover your positions is a bigger fool than this original advertisement. What is wrong with fixed investments that are currently paying 5% as a reliable alternative to Gov securities and volitale stocks. Why not discuss that option?

  • Report this Comment On January 16, 2009, at 2:47 PM, bigm2202 wrote:

    Reading the above rather insightful comments shows me that there are quite a few people with good reasons for negative comments. There are just a whole lot of reasons that I have for my own negativity concerning the market right now. I do not think that anything in the past is a good pattern for what we can expect in the future. But here are some of the things that really bother me.

    1. The whole banking and investment broker mess and the way it is being handled by the government.

    2. Any way I look at it, the market is a confidence game. If you do not have any confidence in government involvement or oversight in the market, then things do not look so good...Then there is the matter of almost outright ownership of banks, brokerages, and insurance companies by the government. I do not want politicians making critical decisions that should be made by people that were formerly running the banks, businesses, etc. The federal government controls too much already. One good example of this was the push to make bankers lend massive amounts to home buyers that in no way should have qualified for loans received. That is the basis of the whole housing market collapse.

    3. You just have to wonder how many more Ponzi schemes there are out there yet undiscovered.

    4. I am dismayed by the number of legitimate brokers that put clients money into the Madeoff Ponzi scheme without doing their homework. I am also concerned about how many brokers will still be in business in a few short years.

    5. I can see our country diving headlong into Socialism as severe as that of any country on earth. Everything and everybody will be taxed to death and beyond. There is not much productivity under Socialist regimes. I wonder how much longer other governments will be willing to hold on to our treasury notes. If there is a significant movement to cash them in, our dollar might be in a severe free fall. With all of the Treasury printing presses turned on, I am sure there will be great loss of confidence in the Dollar anyway.

    6. Some of the appointments made by Barrack Obama are real ding-a-lings. One example is Cass Sunstein. He has, in his past, demonstrated ideas and opinions that would make even the most radical PETA member blush. He supports animal rights and their right to sue in court with human legal representation. He does not believe any eating any animal, bird, or fish, and in the past has expressed his hopes of eliminating all consumption of animal products.

    7. The Middle East is a powder keg. There a number of events that could transpire that would result in a serious shutoff of oil. All governments, Socialist, or Democratic run on oil. All of the alternative sources of energy have great problems associated with them. For example, no one asks the question how much real estate must a wind or solar farm require to match the output of a nuclear power plant, or a modern natural gas or coal electic power plant. There are many other problems with alternative energy sources that you do not hear about because it is popular to be "Green". Bad news about alternative energy sources is not welcome in the main stream media.

    I guess that is enough.

    Big M

    I guess that I could invest in Colgate, and hope people will not stop brushing their teeth. (just joking, I hope)

  • Report this Comment On January 16, 2009, at 2:48 PM, Factrender wrote:

    J.P. Morgan's presentation yesterday on real estate loan maturity risks bears reading. The rising number of maturing loans that must be extended or refinanced in 2010, 2011 and 2012 confirm financial stability is a long way off. Treasury and Fed manipulation of base rates are essential to have any hope of loan restructuring but both agencies will be hard pressed to attract debt buyers by foreign investors given low yields and exchange rate risks beyond the short term. Bailouts and TARP funding in the trillions virtually assures future dollar devaluation and higher rates are inevitable.

  • Report this Comment On January 16, 2009, at 2:56 PM, Bldg52 wrote:

    Yes, advice can be costly.

    My Edward Jones Rep has told me to hold onto my IRA, American Funds portfolio ever since he sold them to me in early 2000, saying I am in for the long term.

    I would have done much better in a long term AAA bond or just kept turning over a CD each year.

    Of course he says I now have more shares due to the reinvestng of dividends, but the shares are now worth a lot less than I paid for them.

    I am tired of hearing "Long Term" I am 70 years old!

    I had the tech meltdown now the credit situation.

    I still remember his words when I asked about the sales charge, he told me about the great research the funds had, then he said, "they do not do that for nothing!"

    So I now take all financial advice with a grain of salt.

  • Report this Comment On January 16, 2009, at 3:25 PM, AugustaGuy wrote:

    Safety?? Short term results??

    The Steelers -6 probably offers more of each than anything on The Street.

  • Report this Comment On January 16, 2009, at 3:50 PM, chiro85 wrote:

    Hi,

    When I saw your headline for this ad, I thought you might be speaking of First Marblehead (FMD). Anyone following your advice on Hidden Gems would have ridden this baby down for a 97% loss. Of course it could get worse and FMD could go BK. Until you guys become price sensitive every pick will be swinging for the fences and hitting a Home run or striking out. In this market, probably the later.

  • Report this Comment On January 16, 2009, at 3:51 PM, fooledagain61 wrote:

    Hear ya on the whole history lesson of the market. The fundamental problem these days is trust. Every day a new story breaks regarding corporate fraud or bogus accounting. Hundreds of billions of tax payers dollars are being throw into the fire with no accountability. We are supposed to TRUST that the government will appropriately track these funds and confirm they are being used for their intended purpose... opening the credit markets?? Hundreds of billions are in the market yet the banks continue to hoard our cash for their own interests. The same government who can't uncover a 50 billion dollar ponzi scam when the case was hand delivered to them on several occasions?? The same government who fails to question the congressional leaders who receive funds from the industries they regulate and allow them to continue to oversee how our money will continue to benefit their friends with campaign contributions??

    What happened to the basic belief if your investments keep you up at night... you are in the wrong investments. Set aside the problems mentioned above are domestic. We could chat for a while longer regarding how one could possibly be expected to invest internationally. India has a few Madoffs of it's own, Russia is corrupt as the day is long and let's not forget our admirable friends in China who can't even play fair in the olympics.

    If safe securities allow you to sleep at night buy them.

    I believe most Americans if they have not already will very soon reach their tipping point. It may take numerous years for folks to trust anyone at all. This country will begin it's recovery when those who have so dramatically let us down fix what is wrong.

    It will be imperative that each and every American have a role in this recovery and begin today re-establishing trust one person at a time.

    Thanks for letting me rant....

  • Report this Comment On January 16, 2009, at 3:56 PM, ragtopbull wrote:

    A historical perspectives although useful have lost their currency in these unprecedented times. In a nut shell the rules of the game have shifted dramatically and many don't grasp the gravity of the erosion to our capitalist system.

    We have a government that owns a healthy percentage of our banks for the first time. We have a government that is making ill advised massive infusions into insolvent companies. We have inefficient economic stimulus packages that are frought with doubtful results pasing through congress. We have mortgaged our children's and grand children's future in the most cavalier manner imaginable. Noone appreciates the number of zeros in billions, never mind trillions of dollars. It's okay that the Fed is printing money 24/7 so the thinking goes...

    The markets recognize this gimmickery. We are better served at looking at Japan and its interventionist efforts of its financial system.

    We are likely in for a long haul. If we do continue to turn away from capitalism and become even more socialist, as our people and leadership seem complascent about, we may be looking at long term market highs right now.

    Cheers

  • Report this Comment On January 16, 2009, at 4:02 PM, grigorythegreat wrote:

    What about Municipal Bonds? Isn't it a pretty safe investment that gives a return of about 15% plus saves you money on taxes if you live in the same municipality or state?

    Please, let me know your opinion about investing in munis.

  • Report this Comment On January 16, 2009, at 4:06 PM, HellooooooThere wrote:

    Thanks, but the only person I trust is myself right now. Where was everyone's crystal ball before the market took a nose dive and who has the crystal ball to tell the public when it is on the rise. No one. The financial planners and those writing articles for sale are looking out for themselves right now, not their clients. I'll take the safe road, thank you.

  • Report this Comment On January 16, 2009, at 4:14 PM, ragtopbull wrote:

    Munis are at risk as well. There is a list of U.S. cities considering bankrupticies. A contingent of mayors is requesting bailout money from congress (seems everyone is line). With real estate values down tax revenus trail and poof we have insolvent munis.

    The rules of the game are changing.

  • Report this Comment On January 16, 2009, at 4:16 PM, JoeJoeBubbaJr wrote:

    What a bunch of whiny, bitter, pathetic losers.

    Market volatility is part of the ride. Always has been, always will be. Even horrible, costly, frightening volatility like that of the last year. Market bottoms are always coincident with bad news. Bigger the bottom, worse the news. Most comments here translate to, "It can't be a bottom. The news is really bad, and I fear it will get worse."

    The second dumb idea is, "Wait to invest until the economy gets better." The market anticipates and exaggerates. The market ALWAYS turns before the real economy. Every rebound off a market low (and the deeper the low, the more powerful the rebound) is greeted with skepticism and disdain.

    Finally, think about the implications of $4 billion in money market funds on the sidelines, all soon to be yielding less than 1%. When the market starts to go, those dollars on the sidelines will panic, but on the buy side, not the sell side. Whoosh.

    None of this is a prediction that the bottom is happening today. None of us knows the date of the bottom. Only morons try to make that sort of short-term prediction.

    For rational investors with a ten-year to twenty-year time horizon, the U. S. stock market is more attractive than the U. S. dollar alternatives. (And foreign markets are in general even cheaper.)

  • Report this Comment On January 16, 2009, at 4:19 PM, madeupLLP wrote:

    Diversification cannot be stressed enough here. The perfect buy is the one in which you know you have stolen something - not that you know some other fool will pay more for it than you did. The only investment making my net worth rise is the purchase of distressed real estate. Stocks are supposedly cheap, housing is definitely cheap. I thought I would never live to see the RTC again, at the time it was called the greatest redistribution of wealth up to that point. I still have several of the properties that I paid 53-57 cents on the $ for in the 90's. The banks, with fed money are again dumping properties. Recently I have paid 1995 prices for several move-in condition properties. What are the homes worth? The test of the value is the rate of return. The rents are returning 12 -13% gross. Ignoring market value - the homes were purchased way under comparables - even if housing collapses an additional 40% the homes will then be at market. I can't be lied to, I can't wake up to find out Steve Jobs is really sick, I can't be Satyam'd, I can't have a disappointing quarter, Bernie can't send me a BS statement. I pulled about 70% out when the Dow broke 4 digits. That was a mistake - because I should have gotten out at 11,000 where I first thought of doing so. Will I put the cash back in equities? Why? Because I "might" get a 4% dividend? Subject to the whims of the Board and the Officers not doing something incredibly stupid? Read the above. I have gov't employed tenants and get paid the first directly from their paychecks. Evicted 1 tenant in the last 17 years. The stock market is based on perceptions - I am going to concentrate on reality. I understand it.

  • Report this Comment On January 16, 2009, at 4:22 PM, zone49 wrote:

    Fortunately for my family, I got tired of seeing my major retirement fund remain flat each month during 4th quater 2007 despite the allocation of short term cash, bonds, foreign, growth, and large cap equities, so I switched everything into stable income funds early in 2008, and was able to stop losing principal, finishing with 2.2% increase in total principal over the year.

    For that account. Several smaller accounts that were mostly in equities - including Motley Fool recommendations - lost overall value.

    I would agree that it's a good time to buy stocks - it was a good time to sell them a year ago. But I wouldn't put all of my money into stock right now. And certainly not anything I will need in the next 10 years.

  • Report this Comment On January 16, 2009, at 4:25 PM, maivin wrote:

    I agree that the 10-year Treasury is not a good investment since it could be reduced in value once inflationary pressures take hold. However, the price of stock that is dependent upon a dividend is even a worse gamble. In the 1980's I bought a REIT that had a 13% dividend (based on current market price). Two weeks later the dividend had shot up to over 18% (the price of the stock went down). The next day, the company deleted its dividend and the stock price went down (never to recover). Purchasing stock for the dividend creates additional risk if the dividend is not protected by increasing profits (since you indicate a dividend growth in the projections, there must be additional profits).

  • Report this Comment On January 16, 2009, at 4:58 PM, MotleyGulibles wrote:

    Fools,

    I reiterate my original mail, and request that you please not send me your blanket promo mail as the sole repply to my inquiry. I am not one who is conditioned to this kind of impersonal response. You hype service, then offer service. If it ever dawns on you to interact with your client base in a different manner you might well benefit from it.

    After the dire yearly (08) results of MDP, it is insulting for any educated individual to receive your PRO service hype. Your best PR would be to have those who subscribed at the onset of MDP, receive 6 months free so as to offer them the opportunity to recoup part of their losses, or simply as an elegant move on your part.

    Why would anyone trust this new PRO service and pay $1499.00 after being burnt by MDP? MDP was supposed to be your cream of the crop and we tanked with it. Including some very poor strategy on the part of the Fool.

    Trust me the Fool hype is your worst enemy, your constant promo mails and the conflictive information within the free newsletters does not serve you well or does it entice to subscribe. And for those that do, you might want to honor your client commitment with some good strategy and decent results.

    Madoff was thought to be a genius when offering his "privileged clients" 8-12% and he tanked because it was unsustainable and had to go Ponzi. MF you are the geniuses you pretend, why don't you create a fund that will outpeform the markets? Presently there seems to be a vacuum you could fill. Or is hype a better way to go?

    Regards.

    J.H.

  • Report this Comment On January 16, 2009, at 5:16 PM, migil wrote:

    As I read thru these comments, I wonder if we've all forgotten that the market is made up of us"the people" investing thier money. It is us "the people" who have elected the congress and judges who have allowed the "Financiers and CEOs" to get away with mishandling "our" money. As long as we sit on our hands and ..do nothing..and allow it, it will remain so. If we remain pessimistic and just complain, it will remain so. The market is driven by how we perceive the economy, if we decide it will get better and invest accordingly and do something about our "Leaders" it will recover sooner. It is the Investor who will make the difference with our Money and our choices.

  • Report this Comment On January 16, 2009, at 5:18 PM, Eric2221 wrote:

    I see where you all are coming from, but this is the kind of trite 'analysis' I expect from my 24 year-old broker and you all know better! This aint your fathers recession...its more like your GRANDFATHER's (yes, i am implying the "D" word). As many have said, this is a crisis of confidence...or lack of it. Until folks on the sidelines see some indication that they can trust the markets are not being manipulated to meet the needs of a new.....our cash will stay out.

  • Report this Comment On January 16, 2009, at 5:26 PM, 88maverick wrote:

    Given all the unknowns, seems to me the only sane way to get back into the market (especially for those of us who bailed before the worst occurred and have cash on hand) is to go in slowly but regularly (monthly) investing a predetermined percentage each month. Won win any races, but will surely be alive at finish line.

  • Report this Comment On January 16, 2009, at 5:32 PM, 88maverick wrote:

    One other thought. Getting greedy is what got so many into this mess. For the next several months, seems to me it's better to get a moderate gain or moderate loss than a swing for the fences approach. I'm dollar-cost averaging -- mundane, but reliable.

  • Report this Comment On January 16, 2009, at 5:50 PM, karmicnoel wrote:

    For BLDG52

    I can feel for you, as I have been there. So listen to

    what I have to say.

    GET OUT of Edward Jones. These people don't want you to be concearned about "YOUR" money,

    and they don't want you to try and move it around, or

    buy different stocks.

    They want you to just keep injuecting the money into

    your account, and let them play with it. Worst decision I have made in the past 30 years, was to put my money with them.

    They are for old people who don't know, don't care, and only look forward to some measly little dividend.

    Try some other brokerage like TDAmeritrade. You'll

    feel like a huge weight has been lifted from your shoulders.

    Walk in Monday morning, and tell them you want to invest all your money in Charter Communications....and watch them FAINT! Then tell them you were just kidding. But you do want to transfer all your account.

    TDAmeritrade will do all the work for you.

    Love and Light; To you and yours!

    Michael / Karmicnoel

  • Report this Comment On January 16, 2009, at 6:09 PM, InsuranceUW wrote:

    This article is so ridiculous!!! Yields on the S&P? are you kidding me? I really don't care that the S&P is yielding 3% after my investments have lost 40% of their value. The only reason its yielding so high is because companies are too stupid to stop paying dividends. Plenty of great stocks dont pay dividends, they serve no purpose, other than making people feel good about the stock they own.

  • Report this Comment On January 16, 2009, at 6:11 PM, imadunce wrote:

    Several interesting comments.

    An earlier post suggested our economy is “largely” based on trust. That’s only partially true. Our economy, which is debt instruments, is based entirely on trust. In fact, the economies of every major nation are based on trust. That’s how FIAT Policy works. There’s nothing other than trust to back debt.

    There’s one thing that history cannot denounce; FIAT Policy always fails. Sooner or later the financial system implodes. New economic and monetary policy evolves. In every case it’s pegged. Whatever commodity policy is pegged to will stifle the bubble growth pattern politicians and the census population desires; nobody gets rich fast enough. So, as we did after the market crash of 1929, we move away from rationalism by convincing ourselves this time we’ve learned from our past mistakes. And eventually history does what it always does; repeat itself.

    For the Bush Bashers in the crowd this should rattle your nerves. Our economic woes do not rest on his shoulders. Pay attention to the facts and do “real” research if you doubt me. Bubble after bubble occurs and pops. It’s cyclical and comes on the heels of one, two, three or more administrations’ policies which proceeded. The nature of a bubble, its very design, is to draw in suckers by creating something that isn’t there. Once they show up the bubble bursts. Under FIAT Policy controlled inflation is critical. When there’s no real force to drive inflation/growth and the economy flattens, recession actually becomes critical. But, recession isn’t tolerated. To avoid the political shame of recession, artificial inflation is introduced. Yesteryear, when this was an industrialize nation (long before the Gold Standard officially died in 1971) that meant WAR. War got our factories running and people working and spending; we grew. War no longer works that way. Now what do we have? Simple; we have bubbles. And when we run out of bubbles to create the FIAT system collapses; again!

    Meanwhile, the stock market is your casino. Roll the bones at your own risk. But remember the playing rules of any casino; more players must lose than win or the casino closes. Oh, the winners always have to be those that run the casino…just in case you overlooked the fundamental. So, the question is; who really runs the casino? That I can’t answer for you. What I can answer for you is based in fact. Leading up to the market’s complete collapse of 1929, the media and the market manipulators repeatedly sounded the “all clear” signal.

  • Report this Comment On January 16, 2009, at 6:33 PM, mineralt wrote:

    Sorry, but I am not catching a falling knife. Dividends? When our GDP drops 10%, how much less Coke do you think is going to be sold? I say a lot less, and bye bye dividend.

    There are a lot of 6% AAA bonds out there right now, and you know what, you'll be ahead in line of the stock owners.

  • Report this Comment On January 16, 2009, at 7:25 PM, alowicious wrote:

    I agree cash or T-Bills are a terrible investment, if you are talking about a 10 year run. But in 2008, cash was the best investment! And it still is, until we can see light at the end of the economic tunnel - like a halt to rising unemployment and increasing real estate foreclosures.

  • Report this Comment On January 16, 2009, at 8:54 PM, Promersa wrote:

    When I was a kid, banks wouldn't loan more than 50% on a house and the mortgages were for 10 years. People would be frugal and save up for a home. The problem with the US is that people want everything "NOW" and mortgage their future for instant gratification via credit cards. I believe the savings rate is around 2% the last I read. Get back to Ben Franklin's philosophy of saving for our own future and not depend on Uncle Sap for retirement.

    A couple of years ago, there were ads for loans for 125% of the value of a property -- a fool's paradise

    }:>(

    By the way, Argintina is spelt Argentina -- (January 12th.)

  • Report this Comment On January 16, 2009, at 9:06 PM, Tracemins wrote:

    Wow. There is an amazing amount of pessimism on this board. Understandibly. On the other hand, as all the great investors say, when it looks the worst, it's time to buy. And right now, it looks the worst. We are already over a year into this recession, and we will eventually come out. To randomly say things like

    ( as Jeffduby wrote above) p/e ratios will be right where their supposed to be as earnings come in, and also that dividends will most likely be slashed...is pure pessism. He also says "There go 2 or your 3 arguments right there". Ridiculous. It hasn't happened yet. It's obvious most people on these boards are "doom and gloomers". Always bearish, and things will only get worse. Right now, the P/E ratios are way low, and there's no sign of companies slashing dividends. If you miss the beginning of the new bull market, you miss a large portion of the move. That's been proven time and time again. The largest part of the move is in the 1st few weeks. And, Jeffduby, to compare getting in the market now w/telling your son to go play on the highway, when ut's already come down over 50% from it's high, is pure fear, and not based on fact. The worst is already over, and the only people believing otherwise are the doom a gloomers, that are truly not experts. That are only rarely correct as even a broken clock is correct twice per day.

    Be$t,

    Trace

    Bob Brinker (who puts out the financial newsletter Marketimer) just issued a buy signal. We are

  • Report this Comment On January 16, 2009, at 9:09 PM, Tracemins wrote:

    Oh. Sorry. Also, Bob Brinker did issue a buy just this week. This is a true expert, and one of the few guys in the country that know what they are talking about (just as I believe TMF does also).

    I believe we have already bottomed, and are entering a new bull market. Don't miss it.

    Trace

    You can check him out.

    http://www.bobbrinker.com/

  • Report this Comment On January 16, 2009, at 10:05 PM, wunnerful wrote:

    I agree on caution these days, but in the run up to the great losses of 45% or worse, no one seemed to mention what I did - I moved retirement funds into an Equity Indexed Annuity. If the market drops, I lose no value for the year, but earn zero. If market rises I earn a little less than the market. My principal can never reduce, and new highs become the new principal. Sounds like win win to me these days. I'm about 7 years from retirement thought. Comments?

  • Report this Comment On January 16, 2009, at 10:50 PM, slevie2nd wrote:

    "Yo, Mr. Fox, how them chickens doin?"

    "Chickens? Oh, them chickens are good. Oh yeah, them chickens are gooood"

    Somewhat comforting to see BRWN8484 list out the real culprits of the economic meltdown. My personal favorites are the ratings agencies and the insurance companies. Not the ratings agencies that grossly over-rated the financial instruments and derivatives that greased the downhill skids, but the front-end credit-rating agencies that presumably protected lenders from unqualified borrowers. Brings to mind the historic statements: "Brownie, you've done a heck of a job", and "Mission accomplished".

    What these agencies really did was give the lending institutions a Carte Blanche to charge obscene and morally bankrupt interest rates and hidden fees to people trying to get a piece of the pie, across the board. The ratings agencies didn't do a thing to prevent this mess from happening. In fact, they facilitated the process. The commission mongers of the world just ate it all up, and and the rest of us got sucked down with them.

    And then we have the insurance companies. Has anyone noticed that no one but the extremely wealthy cannot: buy or register a car, obtain medical care, or purchase a home, without first purchasing insurance? The fact that only the very wealthy are exempt from this trap should tell you what political party is behind the trend.

    Here's a hint: go back in time to see which administration decimated the Pell Grant program, starting this country on a long and steady decline in an educated workforce.

    What this country really needs is a bounty on foxes

    Steve C.

  • Report this Comment On January 16, 2009, at 11:41 PM, courtneTHEgreat wrote:

    Does it feel like we are players in a game that we have no control. Play logic, my friends.... Buy low and wait. It may take 5 to ten years to recover, but there are better things to do than to worry/think about something we cannot control.

    If the market goes up next week.... ask yourself is there a real reason why.

  • Report this Comment On January 16, 2009, at 11:41 PM, danbfooled wrote:

    Dividends are about as stable as smoke rings right now, and this article shows the folks at TMF have been smoking something again!

    Layoffs continue to grow as companies, whose profits have crashed, desperately look for ways to cut their costs. Perhaps the TMF's have failed to note that DIVIDENDS ARE AN EXPENSE.

    Do your homework. More than a few companies whose business models had not really been performing all that well over the last couple of years, had been BORROWING to continue to pay their dividends. Companies that have experienced a dramatic reduction in business are far poorer credit risks. Combine that with much tighter credit markets.....No more credit = no more dividends.

    If you think we're near the bottom think about this.

    Layoffs are growing at an ever increasing rate. The full effects of the last few months layoffs haven't even started to be felt in the economy yet.

    When these folks (and those to be laid of in the next few months) begin defaulting on their mortgages, students loans, credit card payments and auto loans do you think credit it going to loosen up?! Do you think the consumer economy is going to "heat up" in the face of this kind of financial meltdown?!

    Dividends are the next casualty. Sit on your cash.

  • Report this Comment On January 16, 2009, at 11:58 PM, medixbio wrote:

    I've already 100% fully invested in stocks as of 11/25/2008.

    The stock I love most happens to be one of the "falling angels" (fell below $1) . When a stock fell below $1, many mutual funds dumped.

    Thermogenesis (KOOL) had a minor product recall at the worst time of stock market. No debt, no competition, plenty of cash, just about to become profitable for the 1st time.

    How many companies can raise price on its products 25% now? KOOL just did. Do your dd before investing as always.

    KOOL a 10 baggar? you tell me...KOOL is like the TECH hardware 10 years ago.

    This stock should be a core holding for anyone looking to buy a big winner in its early days.

  • Report this Comment On January 17, 2009, at 12:04 AM, jamiefaunt wrote:

    Fools indeed! We haven't seen the bottom of this market. Say 'hello' to 5500 on the DOW this year!

    These guys aren't traders. But I guess they don't pretend to be. For them the only direction is up it seems. And that's not trading.

    We're at the threshold of a very long bear market and tons more bankruptcies. Lots of hard times ahead for most. Learn to trade. This is no time for "investing."

  • Report this Comment On January 17, 2009, at 12:27 AM, trenton1ryan wrote:

    < Also, Bob Brinker did issue a buy just this week. This is a true expert, and one of the few guys in the country that know what they are talking about (just as I believe TMF does also).

    I believe we have already bottomed, and are entering a new bull market. Don't miss it.>

    Think whatever you want. The rest of us disagree.

    And personally, I don't give a $h@t about Bob Brinker.

  • Report this Comment On January 17, 2009, at 12:32 AM, trenton1ryan wrote:

    <KOOL a 10 baggar? you tell me...KOOL is like the TECH hardware 10 years ago.

    This stock should be a core holding for anyone looking to buy a big winner in its early days.>

    Jeez, have you ever read a more obvious (and shameless) pump??

    We live in interesting times.

  • Report this Comment On January 17, 2009, at 1:38 AM, imadunce wrote:

    <“My personal favorites are the ratings agencies and the insurance companies…What these agencies really did was give the lending institutions a Carte Blanche to charge obscene and morally bankrupt interest rates and hidden fees to people trying to get a piece of the pie, across the board.”>

    There’s enough culpability to go around. Regardless of how complex the divertive or how difficult, if not impossible, it was to “actually” rate; the inevitable liability rests squarely with the borrowers. That’s where it starts and ends. There’s a simple concept in mortgage lending; final representations and warranties. Therefore, any borrower who signed documents they didn’t understand acted out of greed or speculation. Any borrower who chose a loan product more complex than they could grasp acted out of greed, speculation or worse; stupidity. There’s no excuse for stupidity because in today’s world you don’t need to be rich to be informed. Any borrower who failed to accurately represent their true finances acted out of greed and committed fraud. Just because something, you pick it, is readily available is no reason to rationalize its benefits. Look back at my previous post. FIAT Monetary Policy creates inevitable failure because human nature cannot be eliminated from the equation. The bubble swells and human nature drives people to act out of fear of loss. “The fear of loss is a far greater motivator than the promise of potential gain.” There’s your foundation for speculation.

    Now, having cast blame on the bubble’s culprit, I’m not insensitive to the innocent victims. They, unfortunately, have become the carnage a deflated bubble causes.

  • Report this Comment On January 17, 2009, at 1:46 AM, imadunce wrote:

    Danbfooled, you raise an interesting case; scary but interesting. The only concern I have is the economic consequences of your observation… a DEFLATIONARY SPIRAL! We are dangerously close given that the remaining economic stimulus the Fed has left is our printing press. Without stimulus the vicious spiral of deflation leads to further job losses and more credit tightening. No more credit equals zero dividends.

    There’s also another event to contribute to your case. The pending flood of Real Estate Owned (REO) banks are carrying. The moratorium on foreclosures has nothing to do with stabilizing home prices (though holding inventory may impart a degree of short-term stability) or keeping people in their homes. The Banks are undercapitalized. Adding more non-salable assets to their balance sheet would be another hit to capital. That’s why the TARP’s injection failed to stimulate lending; the Banks need the capital just for survival. Then there’s the next foreclosure wave. Pay-Option and Alt-A loans are about to make their presence known. The backlog of REO combined with new foreclosures will be chaos. Either further price declines occur or Banks will carry the asset in the hope that inventory equilibrium permits the asset sale. Goods and services will take another hit, and business will look for ways to generate sales. The beaten down consumer will need to decide whether to buy today or next week when prices drop again. Near bankrupt businesses will struggle for ways to compensate for further price breaks. The answer will have to be more layoffs or wage cuts or both. Face it; your scenario would be the economic equivalent to the “PERFECT STORM”.

  • Report this Comment On January 17, 2009, at 3:37 AM, mtracy9 wrote:

    A lot of people on this board are acting as if they have never seen a recession before, and a resulting stock market dive. Admittedly, this recession looks to be worst than most, because a huge asset housing precipitated the current downturn. However, as Warren Buffett points out, people should get used to seeing recessions. Modern history shows that it is rare to go more than a decade without seeing an economic downturn. A young investor can expect to see several recessions during his or her lifetime. Moreover, history has shown recessions to be incredible buying opportunities. There is no reason to expect that this time will be any different. As Buffett says, "Be fearful when others are greedy and greedy when others are fearful."

  • Report this Comment On January 17, 2009, at 5:07 AM, niru53 wrote:

    The banks, run by private executives trying to make short term share price increases, made toxic loans that went bust.

    The government took its eye off the ball by not regulating the banks sufficiently to ensure they lent appropriately.

    We, the voters, are responsible for electing competent governments.

    As a result of this, the government (i.e. taxpayers today and in the future) have to bail out the banks and hopefully regulate them properly to ensure that loans are made to productive activities and not for speculative activities.

    This will result in inflation (i.e. a hidden tax) or in higher taxes (explicit taxes).

    Seems clear to me. The answer: elect competent and responsible government and not on half baked ideas of religion, ideology or marketing. The buck stops here, with us, the people.

  • Report this Comment On January 17, 2009, at 5:40 AM, matcha695 wrote:

    Buy several MF memberships. The MF guys would really enjoy more money! It is easier to sell investment advice than to invest.

  • Report this Comment On January 17, 2009, at 6:52 AM, GregMcCulley wrote:

    The good news is the bad news:

    Nothing in life is ever as bad, or as good, as it initially seems.

    GMAC

  • Report this Comment On January 17, 2009, at 7:53 AM, MEG1612 wrote:

    You shouldn't be so pessimistic. Yes 2009 will be a bumpy ride as well, but for sure there will be plenty of opportunities if you play your cards right. After all I personally made 106% return on my money in 2008. That's right 106%. At times I thought I was having a hard attack but finally I managed very well without using a broker.

    Good Luck and don't be too conservative

  • Report this Comment On January 17, 2009, at 9:53 AM, venkytalks wrote:

    Only about 60% of the bad news is out, 40% bad news is yet to come (in my estimate). Some of the bad news still waiting to happen are:

    Short Term (for 2009):

    1. Earnings degrowth in Chinese companies, leading to loan defaults, Chinese bank failures and depressing commodity prices. There is a deafening silence from China right now, the bad news is likely to be humongous.

    2. Earnings degrowth in Indian companies - though most companies will ride out the storm

    3. Low commodity prices decimating the remaining value in Russian and Brazilian companies with loan defaults and more trouble for International banks

    4. Slow grind down in USA with increased job seekers (fresh grads, laid off people and old people who are unable to make ends meet in retirement, all running after the same pool of shrinking jobs), causing marked reduction in salaries - bad news gadget makers and retailers and credit card companies

    Long term (for 2010)

    5. Collapse of the education market, since the fees are not commensurate with subsequent earnings prospect. There will also be student loan defaults, since high fees paid will not yield returns in the job market

    6. Saturation in the computers and techno gadget markets will lead to poor performance by companies manufacturing these, since people will no longer buy useless gadgets when they already have a gadget which does similar work.

    7. Decline in dollar value with low interest rate coupled with high fiscal deficit as the govt pump primes the economy will make imports expensive. People will stop buying cheap crap from Chinese companies because they dont need them and they get expensive. Chinese companies manufacturing useless articles will (and are already) going broke.

    8. European high tech manufactures and high tech services will have a slowly shrinking market. The grind down there will be slower than US but equally prolonged.

    9. Credit card defaults will continue through 2009 and 2010, putting presure on financials. It will also put severe pressure on retailers as is happening now.

    10. Unexpected political events (wars) causing reduction in economic activity, effect of demographics in USA as the baby boomers age and the increased cost of medical attention are all risks not yet factored in.

    My expectation:

    The time to invest in India, China, Brazil and Russia is after their markets come down about 30-40% from current levels when more of the bad news comes out. Maybe later half of 2009 or first half of 2010

    The time to invest in US markets is probably never in our lifetime. At least not for the next 15-20 years. If at all one has to invest, then after markets come down another 30-40% from current levels (Dow 5000 levels) in sharp downturns and trade actively, getting out on every sharp upturn.

    Long term hold strategy may be to buy into low cost mutual funds at every downturn (Dow 5000 to 6000 levels) for young people. Old people are not able to hold for 10 years, so stay away from this strategy.

    Stock selection will be very difficult in the next 10 years, since there is a change in the pattern of world economic activity, similar to what happened in the sixties and seventies. The tree will bear fruit in 2020, which tree nobody knows.

    Old people should invest in debt securities for regular income.

    Remember:

    1. The time to invest long term in stocks after the 1929 crash was 10 years later in 1939.

    2. The time to invest after the recession of the seventies and early eighties was 10 years after 1974

    3. Stock selection after 1929 and 1974 was successful in the hands of just one or two super investors. And we dont know how much of that was luck siding with them

    4. The world was changing in the 1930s. And the 1960s and 70s. The old ways died and nobody anticipated how things would be.

    5. The world is on the threshold of unanticipated change, just like the 1930s and 1970s. The old ways will die. New patterns of living will emerge. The rules of investing will of course remain the same. And they are screaming - WATCH OUT! BE CAREFUL! DON'T GET TOO GREEDY!

    We live in intersting times. Watch with curiosity, but keep your money safe, dont jump in too eagerly and with too much expectation.

  • Report this Comment On January 17, 2009, at 10:28 AM, TMFHousel wrote:

    Venkytalks,

    "The time to invest long term in stocks after the 1929 crash was 10 years later in 1939."

    Just for the record, the Dow bottomed in July 1932 and quadrupled in value by 1939.

    http://finance.yahoo.com/q/hp?s=^DJI&a=09&b=1&c=...

  • Report this Comment On January 17, 2009, at 10:59 AM, Bkeepr100 wrote:

    The title is good, if you are talking about the government and the president elect. This is the worst investment since FDR. America made a dumb choice.

    The dumbocrats are trying the same strategy they did then. The results will be the same:

    Double digit unemployment

    Stagnant economy

    Downturn will last 2-3 times longer than it would have

  • Report this Comment On January 17, 2009, at 11:34 AM, venkytalks wrote:

    TMF Housel, your remark is valid, there were returns in 1930s, they did not beat safe debt returns in terms of risk (speaking broadly). Look at the following charts

    All Time: (In the long term, we are dead and cannot enjoy our money)

    http://stockcharts.com/charts/historical/djia1900.html

    1920-1940

    http://stockcharts.com/charts/historical/djia19201940.html

    Look at the knife you would have had to catch in 1932 (at DJI <40 to get the reward of DJI 150 in 1939. More likely, you would have got in at 1933 at DJI 100 and reached DJI 150 in 1939. Look at 1930 to 1932.How many downward plunges were there - you would have had no returns from 1931 to 1939 if you had called the bottom too early. Old people would die waiting in such a time frame

    1940-1960: No matter where you invest, you make money long term

    http://stockcharts.com/charts/historical/djia19401960.html

    1960-1980: Speaks for itself

    http://stockcharts.com/charts/historical/djia19601980.html

    1980-2000

    http://stockcharts.com/charts/historical/djia19802000.html

    I dont want returns 10 years from now, I would rather put it in debt securities and wait for a better opportunity

  • Report this Comment On January 17, 2009, at 11:55 AM, BeachExec wrote:

    Seems about 90% of the comments here have a clear view into a very negative future that will last years and years, and even decades according to some. None of them will foresee the market bottoming and most of them will miss the opportunities for appreciation of their money. One can't help but wonder how many of these prognosticators took their money out of the market to lock in large losses, and will get back in late to miss the most significant upside move as well, whenever it comes (which NONE of us know).

    I don't believe the bottom is in yet, and I don't think the market will turn anytime soon (as in 2009). I have some cash on the side still looking to be invested over the next year or so (by which time I hope to have more cash looking to be invested). Quite frankly, I don't know and nor does anyone else where the bottom is. What I do know is that there will come a time when the tide turns. Most people here will apparently miss it.

  • Report this Comment On January 17, 2009, at 12:06 PM, km0925 wrote:

    I agree with madeup llp, bigm 2202, brwn8484, and others in these blogs. We are in serious trouble. Part of our problems started with NAFTA, and until our standard of living reaches that of the "developing countries", our economy will continue to deteriorate, and the stock market with it.

    As for political decisions, has any country ever managed to "spend it's way to prosperity"? Mr Paulson is truly the fox guarding the hen house.

    The list of who to blame is a long one, but ultimately, we need to look in the mirror.

  • Report this Comment On January 17, 2009, at 12:56 PM, RaptorD2 wrote:

    Joe, I disagree so strongly with what you recommend that I don't know where to start. So let me just say that TMF has *always* recommended jumping in regardless of the macro-economic trends, and you are still drinking the Kool-Aid.

    Anyone who followed the TMF mantra of always remaining fully invested over the last 12 months has lost a good portion of their retirement and other investing accounts.

    My best investments over the last 2 years have been to short certain industries, including financial. They helped me end up 2008 with a small loss (2-3%.) How does that compare to the old buy and hold philosophy? Even Warren Buffett has stated many times that the gains and income over the next decade will be much lower than in the recent past.

    Maybe it's good advice, maybe not. The point is that nobody knows, including you. And maybe things are truly never different, but I disagree and have to follow my beliefs in my investing.

    I don't care to keep score and come back in 5 years and say, "You were wrong." No, what concerns me most in your comments is the fact that newer and less informed investors will follow your lead, and they will once again be hurt to the point where many will quit investing. And that, my friend, is the ultimate danger in stories like yours today.

    Enjoy the 'Bamanator rally, but realize that it will most likely not last. If I'm wrong, I will not have lost a single penny. Can you say the same?

    Dan

  • Report this Comment On January 17, 2009, at 3:03 PM, Sunshyne43 wrote:

    Would someone please tell me how we can elect competent and honest people to run our government? If a candidate is not sponsored by one of the major political parties, they do not stand a chance of winning. And, even if an honest, hard-working individual who is civic minded manages by some luck to get sponsored by one of those parties, our mainstream media will not allow them to get elected. Case in point -- Sarah Palin. The mainstream (Democratic) media killed her. That was their intention from the outset, and they did their jobs very well. I have lost a lot of respect for most of the network "celebrities" over their performance during the latest Presidential campaign. I now prefer to watch local news broadcasts, rather than the national ones because of their obvious bias. I used to believe that the reporters were supposed to simply "report" what was happening, not make news themselves. That has changed, and now "they" are supposed to help us decide what we think. I very much resent that. So, since there is no way to get the type of people elected that we need to run this country, there will be no way for our financial institutions to regain the trust that we used to place in them. It should be obvious to anyone by now that if a person or institution is making money by either handling your money or giving you advice on how to handle your money, they are not going to be working in your interest -- just their own. I am on the verge of retirement, but not able to because I have lost most of my retirement assets because I placed too much trust in others. Luckily I am healthy and have no need to rely on Medicare, and my job is not in jeopardy since I work for a government that is quite solvent. I used to look forward to a nice retirement with some traveling, but the markets (along with my naive trust in others) have taken care of that. Since I am not able to predict the future, and I don't trust any one else to have that ability, I am keeping my spare cash in CASH. I don't expect that I will regain my former trust of the system (or the people running it)during my lifetime. I do expect that we will have very high inflation rates one of these days to take care of all the money the feds are printing now and planning to print this year. Of course that will devalue my savings. I remember when interest rates were 15% or more on government and corporate bonds. I imagine I will see that again. Maybe then we can invest in U.S. treasuries and not lose everything.

  • Report this Comment On January 17, 2009, at 3:38 PM, Italyssun wrote:

    Also the high of the Dow was 381.17 in the 1929 depression crash, it did not recover back to 381.17 until 1954, 25 years later. But it took the market high of about the year of 1962 for the Dow to equal the dollar buying power of the 381.17 Dow in 1929. Still there were many opportunities in between these years but I would not want to be addicted to the stock market and not look at other investments. But after the 1987 crash it took only two and a half years to recover and make new highs and times were not as bad then like they are now.

    James Bond: "But who would want to kill me, Sir?"

    M: "Jealous husbands, outraged chefs, humiliated stock brokers ... the list is endless."

  • Report this Comment On January 17, 2009, at 4:06 PM, slevie2nd wrote:

    imadunce, you've hit on my two primary candidates for the roots of all evil: greed and stupidity. As for the current crisis, I have pondered adding another to the list: fine print. I suspect that very few people ever read it, and if they do, truly understand it. Same with the "accept" button for downloads, especially free ones. How about the quarterlies and prospectus materials all investors receive on a regular basis? I can tell that you are in the small minority who probably reads and studies them, but you are the exception, not the rule. It is apparent that even the "professional analysts and experts " did not do so, and that was, or should have been, their primary function and job responsibility.

    Most of the people victimized by fraudulent brokers and loan originators had neither the education to read the fine print, nor the training to understand it. It is all legal jargon. Perhaps a Miranda-style rule for borrowers should be considered? All the fine print must be read aloud to the signers before any document is considered legally binding?

    <"There’s enough culpability to go around. Regardless of how complex the divertive or how difficult, if not impossible, it was to “actually” rate; the inevitable liability rests squarely with the borrowers. That’s where it starts and ends.">

    <"Now, having cast blame on the bubble’s culprit, I’m not insensitive to the innocent victims. They, unfortunately, have become the carnage a deflated bubble causes.">

    The thing that really puzzles me is, where do "supply-siders" receive their indoctrination?

    Somehow, as part of the SS mantra, the blame always falls on those who are most likely to be scammed and preyed upon, never on the scammers and predators. Definitely never on the public administrations and incompetent regulators whose responsibility it was to protect and facilitate our economy and FIAT system, but who ultimately paved the way for the foxes to raid the chicken house. I would be very interested to hear a more detailed description of the "innocent victims" you describe. I wonder if any of them hail from Midland, TX?

    As for the innocent victims, let's face it: it's hard to have to show up at the country club in your measley Beamer, week after week, when all your peers are driving Ferraris and Lamborghinis. It's downright humiliating, really. You have to find a way to catch up with the Joneses. As you point out, it's human nature, isn't it? Fear of loss of status.

    While we're at it, here's my take on "tax and spend" vs "borrow and spend" Isn't it really the same as spending what you can afford to spend, as opposed to spending what you can borrow? Or maybe saving for the future as opposed to borrowing against the future?

    The really big problems in life start at the top, and the role models at the top of this economic demise are the ones to blame, not the multitude of "stupid" borrowers.

    The first thing that should be done to eliminate the problems this country faces is to eliminate political appointees from government, regardless of which side of the aisle they reside.

    Steve C.

  • Report this Comment On January 17, 2009, at 5:00 PM, retiredguru wrote:

    It is hard to believe that 95% all preceeding comments are negative on the market. History has taught me that it is highly unlikely that this high percentage could be correct.

    Having said that, I must admit that it is very hard to see the positive side of 2009. The problem with the Motley Fool editors is they seem to have no respect for timing. Buy and hold days are over, as evidenced by the fact that anything one bought 10 years ago is currently under water. Will that change---Yes, but who knows when. I would prefer to miss the first part of a long term recovery so as to have any money left to invest for the future.

    As a new comer to TMF, I joined the Million Dollar Portfolio and followed it for the last 3 months of 2008. I chose to observe their method of advuice and then possibly proceed to make some investments. However, it became evident that their attitude was "damn the torpodeos, full speed ahead" After realizing that had I followed their advice I would have lost close to 40% of my investments, I chose to cancel my subscription and receive a prorated refund. That small cost was a pittance compared to what I would have lost had I followed their advice.

    My point here for being so long winded is to let future newcomers know that they must be careful when they follow anyone's advice blindly. No one can predict the future and only those wanting your money for their unpredictable advice will try. The most disappointing thing of all is that not once have I seen any public reference by TMF as to the reality of the error of their ways. After my 60 years of making personal investments in the market, I should have known that was too much to expect.

    In conclusion, I must say that I will not lose faith in the American domestic equity markets. The one positive thing I have learned is that times will change and we will see better days ahead. How long it will take this time, I don't know. What I do know is that I, along with millions of other investors, remain prepared to put our money to work again in the future. Preservation of capital has not been foolish and placing valuable dollars in short term treasuries certainly has not been unwise, as suggested by authors of TMF. I will live to see another day to invest as times begin to appear more stable, which they most assuredly will.

  • Report this Comment On January 18, 2009, at 4:20 AM, trenton1ryan wrote:

    <. After my 60 years of making personal investments in the market, I should have known that was too much to expect.>

    < I will live to see another day to invest as times begin to appear more stable, which they most assuredly will.>

    I'm impressed. How long do you plan on living??

  • Report this Comment On January 18, 2009, at 11:55 AM, slevie2nd wrote:

    As John Maynard Keynes put it, "In the long run, we are all dead". The foxes just leave trust funds for the next generation of thieves to grow on till they are strong enough to steal on their own.

    Steve C.

  • Report this Comment On January 18, 2009, at 4:15 PM, ctangus wrote:

    I'm surprised to see so many people sour on equities on the Motley Fool.

    The author's first premise - that Treasuries are a bad investment - is blatantly obvious. Low (below inflation) rate of return. While it might take a couple years the $ being pumped into the economy right now will ultimately be very inflationary. Once that happens interest rates will rise rapidly and the market value of Treasuries will nosedive. I've been slowly dumping Treasuries and finally got rid of my last this week.

    The second premise - buy strong, good-paying, dividend companies also seems like a no-brainer to me. At least if you're not looking at retiring in the next few years.

    If one has time, like I do, I'd much rather own a strong US equity paying a 3%+ dividend than hold excess money in cash or treasuries. Market value might still dump short-term, but as long as the dividend holds strong I'm willing to wait 2-5-10 years until equities are overvalued once again.

    There's certainly a chance any single company will collapse so I study their financials and diversify. But on the upside there's a chance of both dividend growth and capital gain.

  • Report this Comment On January 18, 2009, at 5:24 PM, Scud49 wrote:

    <On January 17, 2009, at 3:03 PM, Sunshyne43 wrote:

    Would someone please tell me how we can elect competent and honest people to run our government? If a candidate is not sponsored by one of the major political parties, they do not stand a chance of winning. And, even if an honest, hard-working individual who is civic minded manages by some luck to get sponsored by one of those parties, our mainstream media will not allow them to get elected. Case in point -- Sarah Palin. The mainstream (Democratic) media killed her. That was their intention from the outset, and they did their jobs very well. I have lost a lot of respect for most of the network "celebrities" over their performance during the latest Presidential campaign. >

    All Sara had to do was open her mouth- the media simply conveyed what she said. Her lack of knowledge on key issues was appalling. That "media'" you mention did us a big favor for exposing her for what she was- a desperate marketing ploy by the Republican brain trust.

  • Report this Comment On January 19, 2009, at 2:56 AM, trenton1ryan wrote:

    <All Sara had to do was open her mouth- the media simply conveyed what she said. Her lack of knowledge on key issues was appalling. That "media'" you mention did us a big favor for exposing her for what she was- a desperate marketing ploy by the Republican brain trust.>

    LMFAO!!

  • Report this Comment On January 19, 2009, at 10:26 AM, venkytalks wrote:

    Sara Palin was a kook, and thats looking at her from across the globe.

    I mean, all that winking on her televised debate - that was appalling (Sar apallin, sorry for the very bad pun) !!!

    She was a female Bush - Bush is actually a nice guy, though stupid. This female version was horrible.

  • Report this Comment On January 19, 2009, at 3:01 PM, jkaytech3 wrote:

    In Oct 2007 when the DOW hit 14,000 I looked at it and said time to get out of the market. It took me 2 months to decied. I like a previous fool am 70. I lost big in the 2000 tech crash because I was greedy and all my so called expert advisors were saying in Jan 2000 the DOW is headed for 16,000. It was at 11,000.

    So I moved 95% into money market funds and did not lose the 40% in 2008 like I would have. Sure I only made 2% but at least I still have my money. I too would like to hear more about where the safe money should be. I see lot of ads for bank CD that are paying 4 to 5%. How safe are these CD's.

  • Report this Comment On January 19, 2009, at 5:08 PM, fiftypence wrote:

    Reading at most of the posts above, its great to see that most people aren't following the motley crew advice and blindly investing right now. I think there's nothing wrong in staying in the sidelines right now. Furthermore, even if stocks are cheap right now. After two of the safest industries (Banking n Housing) collapsing, we're not going to be on sure footing for a long long long time. Personally I'd rather let fear get the better of me than try and be greedy. This recession has prooved one thing. The stockmarket is nothing more than a casino and unless you have the patience of 20 years, your better off starting your own part time business or working extra hours at work than betting your money on the stock market which is nothing more than manipulative machine for the rich to empty the pockets of the poor and middle classes of this country.

  • Report this Comment On January 20, 2009, at 1:55 AM, slevie2nd wrote:

    Hard to believe that there are folks out there still holding out hope for Sara Palin. She's already started digging her own hole up in Alaska, before the Democrats even take office in Washington. I'm all for expanding one's personal horizons, but selecting her as a viable candidate for Vice-President did more to expose the sickly underbelly of the Republican Party than a legion of political muck-rakers could have ever dreamed of doing. Let her wink and slink off into the sunset, where she belongs.

    Steve C.

  • Report this Comment On January 21, 2009, at 6:08 PM, Sunshyne43 wrote:

    I can see from the above comments that the reason we can't find honest, hard-working people to run for federal offices is because the mainstream media has convinced most of you that they know what is best for all of us. Oh, well, no one is forcing us to live here, nor are they forcing us to invest in the stock market. Those of us who live in Alaska are quite glad to have Sarah back. She is a great governor, and has cleaned out a lot of the "good old boys" who believe that a government office is a place from which to get rich. I certainly hope that President Obama turns out to be a refreshing change from business as usual in Washington D.C., and that his method of getting the country out of the economic mess it is currently in doesn't create inflation like President Carter's programs did. President Carter was a very intelligent, well-meaning person, and I believe that President Obama is, too. But intelligence and good intentions don't always translate into good fiscal policy. We will just have to wait and see. It is always a dangerous thing to have a President from the same political party as the majority of Congress. I don't care which party it is. It sets us up for too many changes without enough deliberation. So, hang on to your hats -- we're probably in for a wild ride!

  • Report this Comment On January 21, 2009, at 9:20 PM, JCoeur wrote:

    Sure, great. There are bargains, but what are we saps supposed to use for money now that we've been misled and swindled to death?

  • Report this Comment On January 22, 2009, at 3:16 PM, fishslayer56 wrote:

    Slow and steady wins the race. My father once told me that he's happy to get a constant return of 4+ on his investments (and he's doing very well by the way), than gamble on a 6% or better yield. I took that advise and I'm good with where I sit right now.

  • Report this Comment On March 07, 2009, at 8:14 PM, TTLump wrote:

    I just read through this article and comments, and of course I now have the benefit of 20/20 hindsight to speak from, but I think that if TMF wants to retain a shred of credibility with it's subscribers, they need to respond to the cirticisms that are levelled in most of the responses to this article and in many other similar articles where TMF is recommending similar strategies.

    As you all know by now, the S&P has fallen almost 25% from Jan 12 when this article was written until today, Mar 7. If I look at other articles written as recently as today and yesterday, the TMF bunch are STILL recommending BUY! And for the same reasons! How embarrasing! but of course to try to avoid embarassment, the emperor and all his court must avoid even the hint of any acknowledgement that he is naked!

    It seems as if TMF has lost the most basic ability to rationally evaluate stock prices in the context of admittedly unusual and difficult economic circumstances.

    But all things must come to an end and I suspect, even TMF will become bearish WRT the market at some point, and I am tempted to say THAT would be the time to buy, but I won't. Or perhaps they will keep recommending BUY until the day it actually IS the right time to BUY and then they will say "we were right all along".

    To be fair, they DO beat the market on a consistent basis, and being down 20% is better than being down 40%, but I would MUCH rather be down 0% or even 10%, wouldn't you? This TMF fixation with BEING IN THE MARKET AT ALL TIMES is FOOLISH! Sometimes it's better to have your money in cash (or gold), (or perhaps rental real-estate as one person suggested).

    "BUY AND HOLD" isn't dead, but it's in a coma.

    "SELL AND WAIT" is the right strategy for this market, but do it now, BEFORE we hit bottom. I don't know where the bottom is, but I don't think we're there yet.

    And then expect an L shaped bottom for YEARS, like the 30s. I'm not saying you shouldn't invest in good under-priced companies with solid fundamentals and strong prospects for growth, but you MUST take the macro-economic factors into account when you are calculating their intrinsic value and their realistic earning potential.

    Once this thing hits bottom, and what's left of the economy has stabilized, and the survivors have emerged from the rubble, THEN would be a good time to look at some high dividend payers.

    Now would be a good time for Joe Magyer to respond.

    -- Terry

  • Report this Comment On March 07, 2009, at 9:15 PM, thisislabor wrote:

    Im not going to read all 8000 posts here. I'm just going to ask about this sentence:

    -

    but according to Dr. Jeremy Siegel, portfolios invested in the highest-yielding S&P 500 stocks outperformed portfolios in the lowest-yielding by almost five percentage points a year from 1957 through 2003.

    -

    Do you have research data to support this? If so, where can I get a copy of it? Is there by chance a research paper written on this I can pull up on Lexis-Nexus, or El Savier's database?

    -

    any research or data proving that statement would be totally cool to read.

  • Report this Comment On October 01, 2011, at 7:37 PM, HarryCaraysGhost wrote:

    Ha!Ha! Gloat away Truth.

    Gloat away......

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