Are We Headed for Another Lost Decade?

A few months back, I received some surprisingly solid investment advice from a cab driver, of all people.

But it wasn't a hot stock tip, or any sort of insider information. Instead, it was a simple observation about life in general: "Sometimes the key to getting what you want is to stop looking for the right answers -- and start asking the right questions."

Sure, it's a bit cliche. But, you know, I think if financial headlines are any indication, right now every investor in America is looking for the right answer to the wrong question …

Are we headed for another lost decade?
Granted, I can't blame them. After all, every dollar invested in the S&P500 on Dec. 31, 1999, was worth a mere $0.75 one decade later.

Not to mention, nearly every company that seemed invincible in the '90s went on to absolutely take it on the chin in the '00s.

Stock

% Change in the '90s

% Change in the '00s

Microsoft (Nasdaq: MSFT  )

9,637%

(36%)

GE (NYSE: GE  )

1,120%

(61%)

AT&T (NYSE: T  )

338%

(11%)

Home Depot (NYSE: HD  )

3,836%

(51%)

Corning (NYSE: GLW  )

765%

(53%)

Phenomenon or foreshadowing?
Believe it or not, according to Standard and Poor's, this was the first time the 500-stock index ended a calendar decade with a negative total (dividends included) return. Equally amazing, the S&P500 has never posted back-to-back real (dividends excluded) losses in calendar decades.

In fact, the last time it finished a decade in the red -- when it posted a real annualized loss of 5.3% -- was the 1930s. Of course, it then went on to post annualized total returns of nearly 9% in the '40s and 19% in the '50s.

Meaning we're headed for the next great bull market?
It might be tempting to think so given that iconic American businesses like Ford (NYSE: F  ) and Caterpillar have skyrocketed from their March lows, while Apple (Nasdaq: AAPL  ) and Amazon have hit all-time highs despite a sluggish economy.

But then again, it's hard to ignore all the doom-and-gloomers calling for crippling hyperinflation, unprecedented national debt, and the complete collapse of the dollar.

Point is, you might be so busy looking for the right answer, that you've stopped asking the right question …

"How can I make my money work hard for me?"
It's what got all of us into investing in the first place, yet we often get so sidetracked looking for right answers that we forget to keep it front and center in our decision-making.

Of course, given everything that's happened over the past two years, it is quite possible that the rules of the game really have changed. And like it or not, simply stashing your hard-earned money into an index fund may no longer work.

Which brings me to another piece of advice that was drilled into my head at a young age ...

"Always change a losing game"
It's with this in mind that Motley Fool co-founder David Gardner and options guru Jeff Fischer launched their Motley Fool Pro service.

While they continue to believe in the long-term wealth-building power of investing in great businesses, they also recognize that in order to succeed, you've got to adapt.

That's exactly why they used $1 million of The Motley Fool's own money to construct a cutting-edge long/short portfolio built for the next decade. It not only invests in domestic and international stocks, but also utilizes more complex investment instruments like options and ETFs.

One final question: Are you in?
David and Jeff are inviting investors like you to join them in their quest to make big money over the coming decade -- no matter what the market does. If you'd like to learn more about this unique opportunity, simply enter your email address in the box below, and they'll get in touch with you shortly.

Austin Edwards owns shares of Apple, AT&T, and Caterpillar. Apple, Amazon, and Ford are Motley Fool Stock Advisor recommendations. Microsoft and Home Depot are Inside Value selections. Motley Fool Options recommends diagonal calls on Microsoft. The Motley Fool is investors writing for investors; it has a disclosure policy.


Read/Post Comments (10) | Recommend This Article (21)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 15, 2010, at 11:29 AM, Seansonfire wrote:

    I think you can hardly say the 00's was a lost decade. The only reason we ended up even on the stock market was we started the decade on one of the most overbought markets in our history and ended it in a recession.

    If you shift your timeframe back 2 years from 1998 to 2008, I would look like we had one of the best decades ever for stock market returns.

    SPY at start of 1998 $97.06

    SPY at start of 2008 $146.2

    Return % = 50.6

  • Report this Comment On January 15, 2010, at 11:38 AM, pondee619 wrote:

    Why/how is Motley Fool Pro better than the other services sold by the Fool? Please explain why I should buy Pro over any of the other services.

    You ask: "One final question: Are you in?"

    I ask: Why shoud I be?

    Thank you:

  • Report this Comment On January 15, 2010, at 2:57 PM, TMFFischer wrote:

    Hi pondee619,

    I won't say that Pro is better than any other service; it all depends on what you want to do with your investing. But Pro is the only Fool service that aims to make money in up and down markets with longs and shorts and frequent use of options. It's also the only Fool service that is using options to make regular income. And it's the one service that manages a full portfolio (real money) of stocks, options, and ETFs together as one, with a goal of high accuracy and gains in various market conditions.

    So, that's how Pro is different. It has different goals in down markets or flat markets and it uses more and different tools to achieve those goals. At the same time, the core portfolio is and will be long-term stocks that we obviously enjoy owning. In up markets, those stocks will likely earn most of our profits (while options will help, too). In down and flat markets, it's options and shorts that will earn most of our profits.

    Thanks for your post!

    Jeff

    Avisor, Motley Fool Pro

  • Report this Comment On January 15, 2010, at 3:28 PM, pondee619 wrote:

    Thanks, to both. I'm interested in seeing the "stuff" on Pro shortly. More than a little leery in using a game (CAPS) in investing decisions, though. Too many CAPS "players" are admitting to "gaming" CAPS to be of comfortable use in picking an investment.

    "it all depends on what you want to do with your investing." ? I don't understand this. Isn't superior positive total return the only goal worth while in investing?

    I'll get back to you once I see the Pro stuff.

  • Report this Comment On January 15, 2010, at 4:49 PM, edyboom223 wrote:

    "It all depends on what you want to do with your investing."

    I assume this is talking about growth vs income. Some people want to make money with rulebreakers or other explosive stocks, others want to preserve money with possibly bonds or stocks with dividends.

  • Report this Comment On January 15, 2010, at 4:49 PM, edyboom223 wrote:

    "It all depends on what you want to do with your investing."

    I assume this is talking about growth vs income. Some people want to make money with rulebreakers or other explosive stocks, others want to preserve money with possibly bonds or stocks with dividends.

  • Report this Comment On January 16, 2010, at 8:50 AM, grandpay wrote:

    I once dabbled in options (with pie in the sky promises) and it was not good. I will therefore watch Pro from the outside and see where it goes before considering risking hard earned cash on options trading again!

  • Report this Comment On January 16, 2010, at 10:49 AM, wonteach wrote:

    There is only one thing that anyone wants to do with his/her investments: make money. There are only two potential complicating issues that I can think of: risk and taxes. i.e. some people have a lower risk tolerance than others and therefore are willing to limit their potential gains in order to limit their potential losses; and some people want to limit or delay their tax liabilities. But otherwise, the wide multiplicity of "investment goals" assumed by the purveyors of investment advice is just so much BS.

    The assumption of nonexistent complications enables the advisors (such as the Gardners) to engage on what marketers call "product differentiation" - the same gimmick that shampoo manufactureres use when they sell eight different varieties of shampoo which don't have any truly significant difference in how they treat your hair, but each of which sell at a higher price than just plain old shampoo would sell for.

    If investment advisors were more honest and readers were less gullible, then each advisor would have exactly one newletter, and it would be devoted to one simple goal: how to make the most money. Motley Fool wouldn't be sending me ten ads for new "services" for each one email I get that has any real advice - a practice which is getting damned annoying.

  • Report this Comment On January 19, 2010, at 1:39 AM, joandrose wrote:

    Seansonfire -

    you are absolutely correct - it proves nothing to arbitrarily choose a particular 10 year period simply to support a particular point of view . If decades are being used to measure market performance - the conclusions reached must be applicable to any decades - not just one.

    A lot of garbage dressed up to look like logic !......

  • Report this Comment On January 19, 2010, at 8:22 AM, pondee619 wrote:

    Well the Pro "stuff" didn't come over the weekend as I had expected. Can't make a decision without the info.

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