Dangerous Denial

Talk to your average market bear, and his or her story likely goes something like this: Investors are in denial. They're not paying attention to the risks. They're complacent and oblivious to looming threats.

Maybe that's true. But look at the results of a recent survey by Franklin Templeton investments, and it looks like just the opposite is occurring.

Franklin surveyed 1,000 investors, asking whether they thought the S&P 500 (INDEX: ^GSPC  ) had gone up or down in each of the last three years.

The results are incredible.

In each year, an average of 56% of respondents said the market declined. But it didn't. The S&P rose 26.5% in 2009, 15.1% in 2010, and 2.1% last year.

Cumulatively, stocks returned 70% from the start of 2009 through this morning -- one of the best three-year runs in history. And yet the majority of investors seem to have their heads firmly in the sand, refusing to believe it. "La la la la -- I can't hear anything!"

This is dangerous denial. There's little evidence of investors fleeing stocks lately, but we know they've been plowing money into bonds, where they're virtually promising themselves negative future returns. You can only assume that people are flooding the bond market because they've felt burned by the stock market. But the irony is painful: The stock market has been an absolute gold mine in recent years.

It's actually not surprising that so many are unaware of the market's rise. Most of the economic numbers over the past three years have been miserable. Unemployment is high. Wages are dropping. Measures of poverty have surged. The government deficit runs more than a trillion dollars per year. If you focus on these ugly economic stats alone -- and they dominate the headlines -- you can't be blamed for thinking the market must be dropping. How could it not during such havoc?

The answer is simple, really. There's very little direct correlation between today's economy and today's stock prices. The market looks ahead. It doesn't care about today's economic numbers. It doesn't even care about tomorrow's economic numbers. It cares about businesses' ability to generate future cash flow. And there's just no way around it: Businesses have done a magnificent job keeping profits intact, even while the economy slows. Corporate profits were at a new all-time high before unemployment had even peaked. There's a big disconnect between middle-class America and corporate America's profitability. And for better or worse, markets are driven by the latter.

"[No] one likes to admit this but the last three years have been great for buy-and-hold," analyst Eddie Elfenbein wrote earlier this year. You just had to stick with it. Stocks go up, and stocks go down. If you let yourself get washed out during bear markets, you'll invariably miss the ensuing rise. And that rise always happens before the economy gets better. Or, as Warren Buffett put it in 2008, "If you wait for the robins, spring will be over."

The largest gains are behind us, but I don't think it's too late for hope. The S&P trades at around 15 times earnings -- not cheap, but not outrageous. Berkshire Hathaway (NYSE: BRK-B  ) still trades at a price-to-book ratio well below its historical average and only 10% above valuations Buffett himself was bullish on. Other blue chips like Johnson & Johnson (NYSE: JNJ  ) offer historically stable dividends that yield double what's offered in Treasuries.

Stocks will almost certainly outperform bonds in the long run. You just have to give them a shot -- and keep your mind open to reality.

Fool contributor Morgan Housel owns shares of Berkshire and Johnson & Johnson. Follow him on Twitter @TMFHousel. The Motley Fool owns shares of Berkshire Hathaway and Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Berkshire Hathaway and Johnson & Johnson. Motley Fool newsletter services have recommended creating a diagonal call position in Johnson & Johnson. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On September 21, 2012, at 5:55 PM, jpsanchezville wrote:

    I really appreciate the writer's optimistic outlook on stocks, but just as he views people of denial in not investing or knowing how well the S& P has done, he is too willing to overlook the minefield that lays ahead for this country. You can't ignore that another move down of 200 to 300 points on the S&P is very realistic. my message is be cautious, invest only in stocks willing to pay you a dividend for the risk you are taking in buying their stock. Another downturn is inevitable.

  • Report this Comment On September 21, 2012, at 6:00 PM, razzamatazzer1 wrote:

    "It doesn't even care about tomorrow's economic numbers"...-this is such a FALSE statement! If that were the case,then the economic problems in Europe and here in the U.S. would not make the market move up or down due to the news...

  • Report this Comment On September 21, 2012, at 6:16 PM, jhs9256 wrote:

    The problem is that to match those percentages the writer gives, you would had to buy every up stock at the right time. I don't know anyone who can buy them all, even if they knew them. Also a large percentage was made up of high priced stocks. Most investors do not have the means to buy higher priced stocks.

  • Report this Comment On September 21, 2012, at 6:21 PM, poochytrinh1 wrote:

    I agree with Morgan Housel but we need to select the stock to invest for a long period of

    time (few years) until the fundamentals of these

    stock deteriorated (not good as we expect).

  • Report this Comment On September 21, 2012, at 6:43 PM, TMFDukenewkirk wrote:

    "The problem is that to match those percentages the writer gives, you would had to buy every up stock at the right time."

    I simply don't understand that remark. My portfolio is made up of 28 stocks, not 'every' stock. Nor have I bought them all at the precise 'right' time either. Nor have I mostly bought 'expensive' stocks, which I assume is supposed to refer to high individual cost per share vs actually 'expensive'. I have many that have still performed very poorly over the last couple of years as I choose to buy a lot of small to tiny company positions that aren't even profitable yet. Meanwhile, the last three years, while I've trailed the overall market still, have seen a significant move up in the overall value of my portfolio, particularly if contrasted with what bonds would have done for me over the same period.

    Therefore, what Morgan has written closely parallels my personal experience. I always look forward to your articles Morgan. You're among my favorite writers in Fooldom hands down.

    Rob

  • Report this Comment On September 21, 2012, at 7:23 PM, jm7700229 wrote:

    @razzamatazzer1, but look; the market went up in spite of the economic problems in Europe and the US. The stock market isn't a monolith, it's a group of individual companies. Any or all of these individuals can out- or under-perform the averages at any time, but long term, and in the aggregate, they always out-perform.

    I keep hearing about people who have had to defer retirement because of the damage to their IRAs. There are three possible reasons for this:

    1. they sold at the bottom of the market and then stayed uninvested.

    2. they aren't paying attention to what their IRAs are actually doing and instead getting their information from politically motivated journalists

    or 3. they didn't actually have the money to retire and want to blame it on Lehman Bros.

    I'm no genius and I'm pretty conservative, but my net worth is about 20% higher than it was at the peak of the pre-crash boom, even though I am living (well) on my investments.

  • Report this Comment On September 21, 2012, at 7:46 PM, Pandorabelle wrote:

    Market is well overdue for a correction - even a healthy one - before any ascent continues. Retail is on the sidelines until it does.

    QE ad infinitum boosts the market temporarily, but hurts the economy eventually, doesn't add jobs and devalues currency so stock prices look higher but are worth less.

  • Report this Comment On September 21, 2012, at 8:32 PM, tbunzel wrote:

    "There's very little direct correlation between today's economy and today's stock prices."

    Why is that? Could it be QE1, 2, and 3 - the Fed itself said it wanted to make people feel wealthier, but NO REAL WEALTH WAS CREATED. These businesses' profits are PAPER.

    The scam is to make people "invest" and take risk because for older people in particular reasonable interest rates in the bank (safely) are no longer available.

    The whole market thing is a complete scam unrelated to actual business performance, rigged for those at the top of the food chain.

  • Report this Comment On September 22, 2012, at 2:02 AM, Gist wrote:

    It is my opinion that the stock market is a bubble. How can we have double digit gains in the worst recession since the 1930s. High unemployment, economy stalled, political stalemate in Congress, Govt contracting companies about to lay off many thousands of highly paid contractors in October, QE3, spending money we don't have, printing money to devalue our dollars and interest rates rise to offset thus creating inflation soon, Isreal about to strike thus Iran launches mines in the Gulf causing oil prices to sky rocket. So...we are due for a correction. October is traditionally a month of correction of 10%-15%. Hope I am wrong.

  • Report this Comment On September 22, 2012, at 6:48 AM, swider333 wrote:

    I would like my MDP account to realize some of these gains the last two years

  • Report this Comment On September 22, 2012, at 7:08 AM, TMFMorgan wrote:

    <<The problem is that to match those percentages the writer gives, you would had to buy every up stock at the right time.>>

    Nope. Those are the returns of an index fund held over the last three years making no changes at all.

  • Report this Comment On September 22, 2012, at 8:27 AM, Usnzth wrote:

    "How can we have double digit gains in the worst recession since the 1930s. High unemployment, economy stalled, political stalemate in Congress, Govt contracting companies about to lay off many thousands of highly paid contractors in October, QE3, spending money we don't have, printing money to devalue our dollars and interest rates rise to offset thus creating inflation soon, Isreal about to strike thus Iran launches mines in the Gulf causing oil prices to sky rocket"

    Assuming this is a question, here is a possible answer:

    Because the stock market is not a measure of any of those things. It is a measurement of tthe beliefs of many thousands, and maybe millions, of individual investors concerning the worth of the individuals companies represented by that market.

    If those companies are profitable and paying supportable returns, the market will continue to rise.

    If your goal is to invest profitably in the stock market, you might be reading the wrong things. Try reading some annual reports for a change.

  • Report this Comment On September 22, 2012, at 11:14 AM, Darwood11 wrote:

    Good article, Morgan.

    When I read some of the "doom and gloom" stuff I do admit that a part of my brain automatically thinks "sell and hide it all." But then the other part of the brain kicks in and says "why?"

    I suspect that a lot of the pain, concern and upset about how things are going in this country has been impressed upon how people think. What's the opposite of wearing "rose tinted glasses?"

    I'm also of the opinion that far too many Americans are wearing those darkly tinted glasses and allowing that perspective to influence too many of their decisions. I am not advocating an "eat, drink and be Merry because tomorrow we die" philosophy. What I'm suggesting is the world will go on, and we'll have to deal with it. Both the good, and the bad.

    I also suggest that far too much time is spent thinking about how to dodge these imaginary bullets. The best we can do is learn critical thinking skills, apply them to our finances, develop a plan, and assess that plan annually.

    In my case, I've got a distributed portfolio that includes a "basket" of stocks, mostly dividend payers ranging from J&J to MCD to NOV. I also have some index funds for stocks and bonds and actively managed mutual funds for stocks and bonds and commodities.

    All dividends are re-invested.

    The portfolio is doing fine, and has been. I've ridden through the "Panic of 2008" and while I am concerned about this economy (who would not be?) I do have to say that I'm not planning any fundamental changes to my portfolio.

    What I and the spouse are doing are working, saving and investing for our eventual retirement.

    At 66, I suppose I could be upset that I still have to work. Life sucks? Nah.

  • Report this Comment On September 22, 2012, at 11:48 AM, gmc0652 wrote:

    It's not that I believe that the stock market has declined. I know it hasn't. But I believe the reality is that if it were based purely on economics it should have. The reason why many companies are profiting is more due to cutting expenses, such as payroll , rather than revenues. Why is unemployment so high (and actually much higher than we are being told)?

    I believe the market is rising because of actions by the Fed, but will there be a price to pay for those actions?

    Yes I am very cautious when it comes to the stock market. After all, I have to be. I've been unemployed since last September!

  • Report this Comment On September 22, 2012, at 12:35 PM, Viking70 wrote:

    @ Usnzth,

    "If your goal is to invest profitably in the stock market, you might be reading the wrong things. Try reading some annual reports for a change." Spot on.

  • Report this Comment On September 22, 2012, at 2:06 PM, TMFMorgan wrote:

    <<The reason why many companies are profiting is more due to cutting expenses, such as payroll , rather than revenues>>

    S&P 500 revenues are at an all-time high too.

  • Report this Comment On September 23, 2012, at 10:37 AM, thenoffya wrote:

    I think the best idea here might not be to get out of the market, but to maybe wait a bit with any new money you have. If the market goes down, I'm fine with that, because even though on paper my assets will decline in value, I still own a collection of good companies that will be around after the correction. At some point, there will be a correction, and I'll be happy to add to my positions or begin new ones. It's important to remember it's a market of stocks, not a stock market.

  • Report this Comment On September 23, 2012, at 11:31 AM, cummingsr wrote:

    In the real world, investment choices must be made on a relative basis. i.e. What are our alternatives at any point in time? Currently, our alternatives to equity investing are distinctly unappealing, thanks to Fed policy. And this is not necessarily a good thing! Lower risk, fixed income alternatives offer unrealistic and historically low real returns, thus we are pushed into equities and their inherently higher risk exposure. Many of us now are not balanced in our portfolios as to debt/equity, risk/reward as we approach or are into retirement. This because of the skewed interest rate environment created by the Fed in an effort to help the terrible employment situation.

    The only plus I can read in the current market situation is the "wall of worry" scenario, because it seems clear that many investors are holding back motivated by lots of worries. Over time, that may help valuation of equities.

    I am long equities, with a bigger than normal for me cash reserve as my anchor to windward. I cannot see exposure to bonds as attractive given that yields are very low, and the probability that interest rates must inevitably rise thereby driving down the price of fixed income holdings.

    Our Fed may have created a monster and it's not easy to decide where we may hide from the consequences. But high quality equities is likely our best alternative, given current realities.

  • Report this Comment On September 23, 2012, at 5:40 PM, desertcounselor wrote:

    The question is: who is calling the shots? Who is the power broker? MUST READ: Hedrick Smith's "Who Killed the American Dream?"

  • Report this Comment On September 24, 2012, at 8:31 PM, gaylwhipple wrote:

    You sight 3 years of S&P growth (26.5%, 15.1% and 2.1% ) as reason to believe that growth is still ahead.

    The way I see it is that the Trend is definitely Down with substantial decreases each year. That should

    signal some real concern I would think.

    Your rationale ?

  • Report this Comment On September 25, 2012, at 10:56 AM, 48ozhalfgallons wrote:

    "..... there's just no way around it: Businesses have done a magnificent job keeping profits intact, even while the economy slows."

    Gentlemen, I present you a classic example of doublethink!

    Profits are intact on the backs of inflation, lower wages, sustained high unemployment and QE cash flow.

    The frustration is how long this will go on.

  • Report this Comment On September 25, 2012, at 1:08 PM, houstonr77 wrote:

    I read a book that says the stock market is not the economy and vice versa. I think this is true. I agree with Morgan that investing in good businesses (competitive advantages, favorable trends) can still bring success. But at this environment, I am inclined to think that ultimately, the economy has to improve first before one can really say that an investment in the stock market is a good bet. I am thinking that the gains in the stock market are due to QE which is temporary in nature. It is just like the "hot money" that enters and exits emerging markets on a whim. I also think that most markets, Asia in particular, are awash with "hot money".

  • Report this Comment On September 25, 2012, at 1:18 PM, TMFMorgan wrote:

    <<You sight 3 years of S&P growth (26.5%, 15.1% and 2.1% ) as reason to believe that growth is still ahead.>>

    No, I didn't.

  • Report this Comment On September 26, 2012, at 8:44 AM, HSHEnterprises wrote:

    Talk about selective data.Start that data slice in 2008 and what do you get.... ?

  • Report this Comment On September 26, 2012, at 8:47 AM, TMFMorgan wrote:

    ^ Stocks have a positive return since the start of 2008, too. So I agree, that would be an even more interesting data slice -- I'm willing to be an even larger majority think stocks declined over that period.

  • Report this Comment On September 26, 2012, at 8:47 AM, TMFMorgan wrote:

    (As, for one, it appears you do.)

  • Report this Comment On September 28, 2012, at 12:04 PM, bbmaven wrote:

    A quick read of most of these comments confirms the article Morgan. Indeed, the wall of worry is steep out there. A significant "pullback" is not just a possibility, but assumed inevitable in many analyses.

    My sense - Investors are not in denial - those running away from the market may be. The risks to world and US economies are real - what makes anyone thing they aren't priced in? Or in other words - if we weren't scared to death of all these potential catastrophes - where would the market be today? My guess - around 1550-1600.

  • Report this Comment On September 28, 2012, at 12:08 PM, A2Matty wrote:

    Great read.

    Usnzth - Kudos.

    I tend to get distracted because I hear too much doom and gloom from from all sources...who doesn't. Morgan's right though, lots of companies out there are gushing cash!

    However, there was a Warren Buffet quote that makes me hope for some doom and gloom - and depending on your age, you might too. I don't remember it verbatim (i'm sure you could find it on this site - where I initially read it) but essentially, if you're going to be a "net purchaser" of shares in the near future, why would you hope for the market to increase?

    I went real aggressive at the bottom of this market and am sitting on a ton of gains. Problem is, I don't need them for 30 years! I'll keep buying, but it would be more fun at rock bottom prices.

    I'm okay with a 200-300 point "correction." Only, I think if you look at traditional PE rations, it won't be a correction, it will be a mistake based on fear/hype.

  • Report this Comment On September 28, 2012, at 12:11 PM, SCBIGSUR wrote:

    "The largest gains are behind us, but I don't think it's too late for hope." -- Hope is not an investment strategy! First the trend in gains does not comport with his conclusion, but it does follow the trend of a faltering rally based on monetary injections with decreasing effectiveness. Nor does his conclusion account for the fact that much of those profits were derived from increasing suspect international markets. Even the gains that were made are largely an illusion delivered by a falling US$. Draw a 3 year chart of GSPC / UUP / GLD and see where the markets got you. One true point is that buy-and-hold investments in the bond markets will end in tears for lots of retail investors.

  • Report this Comment On September 28, 2012, at 12:15 PM, mainelefty wrote:

    Good article. It's fascinating that so many investors are sure the general market fell in the last three years. Survey results like that show up a lot lately in the political realm.

    As one candidate for President once said to his opponent in one of those "make or break" debates, "It's not what don't know that worries me, it's what you know for sure that just isn't true."

    Anyway, for my money, the bubble is in bonds, some of which is the product of government intervention intended to depress rates all along the rate curve and reinflate asset values.

    With austerity in Europe causing recessions and near recessions, the prospect for the USA is a little grim because austerity will almost certainly be needed to reestablish fiscal balance.

    In that light, and seeing economic growth listless, artificially lower rates will be needed for a long time. That means the bond bubble will continue to be supported as much as can be managed, and PE ratios might be expected to rise. In the Cinderella scenario, this happens until Asia and Europe continue their retrenchments and those areas experience future growth in time to support the activities of the US economy when the austerity sets in. Of course, the story of Cinderella is a fairy tale.

    As for the market, it's instructive to remember that they fluctuate and what we "know for sure" is probably not true.. Even after the crash, the Dow was never below 240 and mostly above 250 during 1929, and it had only reached 200 in 1928. In 1930 it reached 294, and then bottomed two years later at 41. It was up just about every year after that until the FED tightened money substantially in 1937. From the peak that year, it gave up 50% by early 1938, and climbed thereafter.

    Given the scope of the financial disaster of 2006-08, and the reasonably effective government response since, I think it's reasonable to assume the markets are not likely to revisit a Dow below 10,000 anytime soon, and the short lived visit to 6500 is similar to the 1933 visit to 41 - the last event in a range which is reset higher in part due to better knowledge of how to counteract the fallout from financial cupidity. We can only hope.

  • Report this Comment On September 28, 2012, at 12:16 PM, strelna wrote:

    I think your assumption that the increased asset value of the market reflects investment based on business success and the prospect of business success is extremely mistaken.

    However, it was possible to make a pile of money in the tech. boom knowing full well it was a bubble, and in the housing boom knowing it was a bubble and the QE infinity boom is no different. Enjoy! The trick is to be an outrageous cynic. Watch the bond market. That is how you will know when the bubble is approaching the pin.

  • Report this Comment On September 28, 2012, at 2:17 PM, WineHouse wrote:

    The market is indeed up, and it's based on real profits. Large corporations have been hoarding their net profits (cash) rather than investing in new hires, which is why unemployment remains low. Dividend payouts have been going up up up also. My dividend stream from my highly diverse stock portfolio has gone up significantly, and at least half of my stocks have increased the dividend at least a little bit each year. When Obama said that corporate America was "doing just fine," he was 100% correct.

    Most of my stocks are in large "global" companies, such as Colgate-Palmolive, Proctor&Gamble, Kraft, etc.. They not only make and sell products in the US, they make and sell products all over the world. Their foreign markets are growing faster than their local domestic market. They really don't care if the American consumer is hurting, because they're making their profits by selling to the rising middle class in emerging markets. And they make those products in the countries where they sell, so they hire workers there rather than here. What do the CEOs care so long as their companies are making money? And what do the wealthy US plutocrats care so long as their stock portfolios keep going up and the dividend income they derive keeps going up? I'm not a "wealthy plutocrat" by any stretch of the imagination, but I've got enough saved up in my retirement funds, invested wisely in individual "boring" stocks, so I am doing okay for myself. That doesn't mean I am oblivious to the fact that I have plenty of friends, neighbors and family members who are not doing okay. I worry about the intrinsic values of the people of this country, who don't seem to care about anybody except themselves. It's not only morally obnoxious, it's unhealthy for the country and is potentially dangerous long-term.

  • Report this Comment On September 28, 2012, at 2:28 PM, sept2749 wrote:

    Yes, I feel there will be a solid correction but that may represent a good buyiing opportunity. I totally agree with "thenoffya" that if you have a good collection of stocks sit back and ride out the correction and don't sell good stocks, rather use the correction to add to postions in good companies - you may get them on the cheap. Paper losses mean nothing - I'm in it for the income stream.

  • Report this Comment On September 28, 2012, at 2:47 PM, ChrisBern wrote:

    Where to begin. First, why focus on the timeframe from March 2009 to September 2012 when writing a buy-and-hold, stocks-vs-bonds article? The fact is stock returns have pretty much been zero over a 12-13 year timeframe, whereas bonds have done VERY well during that same timeframe. Investing in the rear-view mirror isn't a good idea either...but it must be noted that buy-and-hold hasn't been working unless you bought stocks at least 15-20 years ago.

    Second, equity valuations were actually reasonable in March 2009 (a rare occurrence in the past few decades). But they are not reasonable today, and any simple regression analysis will tell you that buying stocks at high valuations leads to MUCH lower returns than buying stocks at lower valuations.

    Also, bonds versus stocks is a false choice. Why are those your only two investment options? The problem with that choice is it doesn't take into account time periods when BOTH bonds and stocks are expensive--which I believe is the case today. Do you really care if stocks are a better investment than bonds if both prove to be bad investments over the next, say, decade?

    Finally, the author mentions all-time corporate profit highs. Yet there's no mention of the FACT that corporate profits are a mean-reverting series. Meaning, when corporate profits reach peaks, go back and look historically at what happens to profits and to the market in the following several years. Hint: profits revert back to their historical mean, and this margin compression (and typical simultaneous valuation compression) leads to very poor and often negative returns. This is an important point for anyone who's considering investing in stocks today to understand.

  • Report this Comment On September 28, 2012, at 2:54 PM, truth4u wrote:

    Missing out? You bet! Sorry? No!

    Reason; The ordinary American (small investor); does NOT TRUST WALL STREET!

    "Fool me Once - - Shame on You! Fool me Twice - - Shame on Me!"

    Long-standing Values like, Trust and Honesty have been swept away by the Tide of Predatory Capitalism; and, what Warren Buffet calls, Financial Weapons of Mass Destruction. Shelia Bair, in her new book (Bull by the Horns), indicated these Weapons were being developed as early as 1999. By 2001; the Nukes were ready for Launch - - and Launched, they were. For six or seven years; the barrage was, constant - - but stealthy. Main Street Lost $10 Trillion; while the Crooks on Wall Street got Rich! Punishment? Hell No! To Big to Fail, carried with it the Guarantee of: Too Big to Indict! Besides, who wants to open the can of worms called, "duplicity?" Not I - - saith, the Government." Them Boys know where the Bodies are buried.

  • Report this Comment On September 28, 2012, at 3:31 PM, poop01 wrote:

    With the fiscal cliff looming and inflation bound to rise dramatically the S&P could fall 90percent before Greece or Spain fail. When to get out? What will congress do and when?

  • Report this Comment On September 28, 2012, at 8:06 PM, MCCrockett wrote:

    if I were asked, I couldn't tell you if the DJIA, S&P, or NASDAQ indices were up or down in 2009, 2010, and 2011. The changes in the indices are irrelevant.

    What is relevant to me is the performance of my IRA, 401(k), and the individual stocks and bonds that I hold. The dollar-weighted annualized rate of return between 2002 and 2010 was 6%.

    Research institutes and the financial press don't have access to detailed information and base their reports on statistical aggregates or changes from a year ago. Both are misleading.

    It's human nature to remember dramatic changes whether positive or negative. Unfortunately, there seems to be a negative feedback loop in place at the moment.

    Research institutes seem to acquire funding by selling "The End is Nigh" reports, The financial press reads the summaries of the reports and use them for their articles.

  • Report this Comment On September 29, 2012, at 4:47 AM, EverWatchful wrote:

    You can pick "slices" of performance periods to prove any position you have preconceived. For example, Bears would compare present day against the Major DIps in 2008 & 2009; whereas Bulls would compare present day against the post-Major Dip data. Anyway you look at it, it is critical to review your performance regularly and not be fearful of making adjustments, including full pull-out when necessary. For me, the European Debt is troubling and domestic "quantitative easing": may distort real performance over a longer run.

  • Report this Comment On September 30, 2012, at 5:23 PM, depthcharge47 wrote:

    I had my money invested in a balanced mutual fund since 2001 until 2010, with dividends being reinvested. My annualized performance was quite pathetic and this was one of the best funds in Canada. Even though the fees were relatively low compared to other funds, my money was not really growing much despite regular contributions and extra contributions when the market was down. After the 2008 crisis I started studying and learning and trained with a direct investment account until finally deciding to invest the whole pension money myself. I am doing OK, better than the mutual fund with some stocks doing very well and others still going down ( such as GTI and NXP...). But reading stuff like "Aftershock" and hearing people talking about inflation (I am from Canada and the Canadian dollar is higher now than the US dollars) makes me feel like getting my money out of the US...

  • Report this Comment On October 06, 2012, at 4:43 PM, thidmark wrote:

    "Another downturn is inevitable."

    As long as we're making bold predictions, here's mine: A full moon is coming!

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