Anyone scared about the economic crisis?
 

I didn't see any threads on it, but maybe I'm blind.

So, in a nutshell, Bear Stearns went for a pittance, the market continues to plummet, loans are getting harder to get...

I have a secure job. I have savings. But I'm worried. We have some $ in mutual funds that are declining, so we are thinking of pulling it all out before its worth nothing. Better to pull out now and loose $300 than to hope it will recover and loose even more.

I can't even find a decent CD offering more than 3%.

My hubby and I were going to buy a home, but decided not too. Markets still too unstable (CNN listed greater DC area in the top 25 locations to continue loosing real estate value, estimated 20% decline over the next 5 years - actually, it was #10). Also they want 10% down - which would take all of our savings. And I can't get a loan lower than 5.925 - and that one was an ARM, interest only, with 10% down! Talk traditional, and its more like 6.5%!

I'm really worried about this recession. I can only imagine if I didn't have job security or savings how I would feel. I worry about my brother - he in construction.

Anyone else scared?

I paid 6.625% and about 10% down in DC 8.5 years ago, and that was an excellent rate at the time.

Of course, it was 6.625% and 10% of a much smaller number than it would be today.

Not here.

My job seems to be secure. We are very busy now, and have a remarkable amount of business heading our way in the future. The next year is looking very busy. We're having trouble hiring enough qualified people.

As a consumer, stagflation would be no fun, but we could tighten our belts and make do just fine for a couple years.

The market is run by a bunch of over-reacting nervous Nellies, and it's a shame. I don't like seeing my 401k go down as much as it has, but I'm still 25-30 years from retirement, so this is no big deal.

The only thing we have to fear is fear itself.

My last mortgage (my first one) was 6%, no $ down. It *was* 5.75%, but since I was naive I didn't realize the home would close late, it was raised by a quarter point for going beyond the 45 day lock or something like that. Lesson learned.

I just can't believe with our credit history and score we can't get a better rate.

I read these articles that go something like this:
"The problem with the market is consumer confidence is eroding. The market is going to continue to plummet. Consumer confidence is gone. It wouldn't be as bad if there was consumer confidence, but the sky is falling and people need to bail out now but the problem is consumer confidence. Buy gold now, put all your money in safe saving but the problem is confidence."

Ok, so you tell me the problem is our confidence level, but then tell us the sky is falling? Its hard for consumers not to loose confidence and overreact.

We've been very busy for the last six years, and I don't see anything changing. If anything, there are more job opportunities now then there were when I graduated in 2002.

If you've done a fair job of saving, you should be able to ride out a short bump in the economy.

I worry about my retirement investments, my sons college savings investments... all tied to the market.

But I more worry about the US as a whole. I worry that more people will lose their jobs and lose their homes and not have health care. Its going to further the divide between haves and have nots. GWB seems to not care about the economy. It seems the more the fed tries to help the worse it gets.

And I have yet to understand, beyond greed, why gas prices keep rising. In the fall it was because of winter heating costs. Now its spring, and the prices are being raised because people are going on vacation. Come summer it will be raised again because of cooling costs, then right back to winter where it will be raised again for heating costs. Ok, when is it going to go down? If its spring and heating costs go away, why doesn't it decline? I know, a rhetorical question. Its because of greed. But how long can we keep paying these prices at the pump?

BSC @ 6.47 today

JP Morgan got her for 2. Now that was a deal...:eek:

Hopefully The Fed is on top of things. To whit: I'm guessing that The Fed forced BSC to be sold this week to prevent the 'surprise' coming later after a recovery had already begun.

aimeecc - it's not just greed that is keeping the price of energy where it is (it's still not high, just higher than we've been accustomed to). Here is some more information.

There are people here who are finance experts, I am not one of them but I do invest and understand the market and how it works. No offense but you would be a fool to pull out and cash in any investments at this time. The only people who loose out are those that cash out when the market plumets. History tells us that it will come back up no matter how low it goes. Just relax and don't panic. If you have a regular investment withdrawl each month let it go and do what it is supose to do, buy more when the market is down so when it comes back up you will gain. Hang in there. The people who need to worry are the ones who have to withdraw money to survive, ie. fixed income retirement accounts, or those who were planning on retiring this year, or needed to withdraw (with a plan of action) this year and were planning on using the options to do something specific. I may be wrong but do nothing at this point.

The prices are smoothed out in the futures markets. You can buy a barrel of heating oil for next heating season, today, at a lower price than you can buy oil for right now. So if something happens in July that will increase the price, the price to the end consumer will rise based on more than just supply, and won't just fall back down either; it'll crawl back down. Speculators buy futures based on everything that drives any market, including fear and uncertainty.

The prices do go up due to greater demand, but reporters don't understand the futures markets, so they don't mention it and people can only assume hidden causes for inexplicable price increases and slow decreases. (Such as greed, which exists in all markets.)

Stop now. You're young, you're still working, you will still be working for at least 2 if not 3 more recessions before you really need to move into retirement investment mode. A properly balanced and managed retirement account will make you nervous because of it's volatility through the years, but that is what makes it work.

May be valid concerns. How old is your child? Are we talking about the one year old? If so, then quit worrying and invest more into well managed growth funds after you log off the cellar - its a great day for you. If your kid is within a couple years of school then you need to go a different route.

Do you mean the market that has made people ill with worry at their losses or the one that has gone on to set new all time highs after each recession? Hey look at that - it's the same market. Stocks have been the single best long term performer for retirement savings in every measurable time frame. Take a deep breath and actually think about what market volatility means to your everyday life. Not that much. Now remember that the talking heads on tv are reading all of their doom and gloom from a teleprompter because they don't even understand some of the words they're using. Let that deep breath out and go about your life.

Now that is a valid point. More people will lose their jobs and homes. That sucks from every angle but all you can do is what you can do - give a helping hand to those you can where you can - your community. More people without healthcare? That sucks too, fortunately there are safety net programs in place to help.

No it won't. The divide isn't dependent on a few dollars here and there. The divide has a stronger correlation to mindset than bank account balance. A few people have nothing. Most people have something. Some people have more. A few people have a LOT more. Don't like where you're at? Change it. You may not catch up to Bill Gates, but you might find away to remove money as a source of concern in your life.

What's good old Dubya supposed to do? Lower taxes? OK, but that seems unpopular. Drop rates? Well, they are, but that is largely responsible for the mess we're in now. Greenspan completely dropped the ball the last time around. Lower rates spur inflation. Do you really want the dollar to be worth even less? The more the government tries to manipulate markets and economics the more things get screwed up. Corrections and recessions are supposed to happen. The greater distance we keep between the government and the economy, the better we'll be.

The planetary demand on oil is expanding exponentially and the supply isn't increasing. The untapped sources within our control remain off limits because of fears for the environment. We have, as of yet, not found a suitable alternative energy source and the supply/demand equation has only recently made it economically desireable to develop it. Sad, but true.
Greed? Sure. Exxon and their ilk could slash their profit margins I suppose, but then they would lose investors. Then how are they going to expand and develop to keep up with demand? Oil futures are more important than the price today anyway. It is a price based on a future expectation of supply/demand. It's just harder to read from a teleprompter.

You'll keep paying the price at the pump until you decide it just isn't worth it and find an alternative. Maybe ditch the FJ first for a Prius. Or maybe a Vespa. Maybe even a bicycle. Maybe you'll change the AC thermostat to 82 instead of 78. Maybe you'll just go without AC. The pain threshold will be different for each person, but it exists for each. Our automobiles and crisp cool houses aren't God given rights, they're luxuries. Just like our HDtv's. And vacations. and... get the point? It sucks but sometimes things happen that cause us to decide against a luxury. I'd like to returf the yard, but it just isn't in the budget right now. Maybe next year. Priorities.

Yea, what he said. Sounds like I am on target or at least near it. Good post LO.

lookout, that was a good summary of just about everything. No wonder they named a mountain in Colorado after you.

I've never had the chance to visit Cold Calloused Prick Peak, but I hear it's nice.

That's not your name. That's just what your grandmother calls you.

She did until she died in the South Tower in 2001. Insensitive jerk.;)

Scared? No. Finally, opportunity is appearing because the damage created by George Jr, money games, oil that was too cheap, et al is finally being realized. That damage created many years ago is only just appearing on spread sheets. Time to worry was when previous posts here discussed dangerously high housing prices fueled by money games (sub-prime loans only one of those problems). At that same time, the front page of The Economist showed a falling brick labeled 'housing prices'. Housing prices must drop something approaching 30% - a number that varies across regions.

How severe is this crisis? Defaults appear to be about 2%. Non-performance loans may be either 4% or 6%. Trivial? Yes. But due to spread sheet lying and money games (similar to those in Enron and encouraged by pathetic regulations by the George Jr administration), the last straw broke it. Many once regarded 'stable' entities (ie Bear Stearns) were doing what Enron did.

A resulting downturn should attack the many entities that have been playing spread sheet games. This will result in job losses, significant inflation, or other problems. But then you should have been preparing for 'bad weather' before my posts were warning of it.

At this point, the majority of damage to investments has probably been done. Company reports will continue to be negative. But knee jerk reactions this late in the storm are ill advised - a generalized comment that may not be valid for some entities. For example, if invested in Chrysler, then consider getting out of what has been a terrible investment for the past decade - see the product to know why.

Starting maybe this summer, some good deals should be available as, for example, house prices drop enough to return to reality. IOW time now to start study or planning for what those investments will be next year.

But again, learn from history. The massive spending by a wacko and lying government has only started to be felt. Deja vue Nam. Once those costs actually appear is about the same time that massive war spending finally stops. America's slow withdrawal (defeat) in 1972 Nam resulted in recession in 1976 and 1979. Don't expect investments to be as robust due to so many outstanding bills. See the next post to appreciate how large those hidden costs. We owe so much money to everyone that the dollar has dropped to $0.67. And then in the past month, it dropped another 4.5%. That is further loss on your investments and a reason why prices must increase.

Economics will punish America for "financial mismanagement" (quoting an international source) by George Jr's administration. Excessive economic incentives when the economy needed to be fixed by a downturn. From the 1970s, the economy prospered by selling off American assets and by exporting. One of the most productive jobs back then was selling used American construction equipment to many other nations that did not use money games to promote (lie about) growth. For example, Caterpillar is finding almost all its growth in exporting construction equipment. And, of course, companies who only cater to the top 1% income earners should remain profitable. Good reasons explain why companies such as Sharper Image must not exist.

Expect problems in public services and government spending. Government has been mortgaging itself especially with tax cuts while government spending only increased. Construction jobs created only by government pumping money (liquidity) into the economy must be reduced significantly - years from now.

Massive drop in the dollar is only part of the problem. Inflation will eventually also take revenge for all that spending created by mortgaging America. What happens to a treasury bond of 3% when inflation is 1.5%? Welcome to another pending problem.

Bottom line - getting out of investments is too late. Your time to get out is when others foolishly accused this poster of being so negative. Now is the time to start preparing for the many good buys. Now is the time to recognize that past history is not a good measure of better investments because some industries were fueled only by George Jr's economic mismanagement (stimulus packages).

When should you have been scared? When the Economist labeled the falling brick “Housing Prices”. The problem was that obvious back then. Too late to be scared now.

Rumsfeld said "Mission Accomplished" would cost about $660 per American and would be paid for by Iraq's oil revenues. If you had any economic grasp, then you knew he was lying.

George Jr now says the war costs about $25,000 per American. From The Economist of 13 Mar 2008 entitled "Eyeing the Wages of War": Figure the war will costs about $3million per American or maybe $8million per every employed American. Those bills will be coming due. Meanwhile, that is a conservative number from those authors. Numbers probably will be higher due to inflation, dollar deflation, and other factors cited by the authors. Who must pay those bills?

Those who only understand war as a solution (ie 'big dics') must now deny this. Remember, America did not pay for most of Desert Storm. So the resulting downturn was mild. But America has yet to pay for "Mission Accomplished". Changes imposed upon the American economy should be considered when planning your financial future.

Aimeecc's question was how to invest? From The Economist of 1 Mar 2008 entitled "Money for old hope: A special report on asset manaegment": This same process occurs when people select mutual funds. Whereas shrewd investors would invest based upon a informed belief in new products and an innovative spirit, Mutual Fund investors tend to invest using assumptions only based in past performance and with little regard to what those investments actually produce. Most mutual funds are a sort of blind trust that somehow the fund will be profitable and mostly driven by past performance. Past performance is not a good measure because of economic pressures that are forcing changes. What should an investor do once this massive downturn created by financial mismanagement works itself out? First we pay fund manager who in turn has us paying middle men. That's many people charging fees; a major percentage of any profit from the initial investment. A well proven point made so often by many but just as often denied by some industry professionals. The average mutual fund underperforms the market. Once it was 'smarter' to invest our own social security money? Suddenly GM is proclaiming 'legacy costs' when GM rationalized that they need not contribute; and now owe $7 billion to pension funds. How many others also thought they could better invest their social security money - and then just as foolishly put that money in mutual funds or other 'we are better because we are professionals' investments. If a cross section of the S&P 500 returned a 12.5% return, then why would one settle for 10% in a mutual fund? 2% is a devestating fee when the average investement only returns 8%. Worse if investments do even worse do to 'economic revenge' and a war that must still be paid for. Now we have a whole new economic environment created by economic mismanagement over these past seven years.

Most people cannot invest in all 500 stocks. Now investors can buy a stock (an ETF) that, in turn, invests in all 500 S&P stocks. Invest in everything by eliminating the expensive 'good looking' professional. Get advantages of a mutual fund without the major expense - the professional. Reap higher returns by investing in an index fund. Or invest in ETFs. Some famous ETF stock symbols are SPY & QQQ.

I'm honestly not sure if you misunderstand or if you knowingly misrepresent what the numbers mean, but either way your ability to do so is mystifying.

Maybe you'd care to step back a moment and reread the last time we went through this issue.. IIRC you still had a couple of questions you were going to answer for us.

Would now be a good time to mention short-traded ETFs again? For every direction the economy heads, there are ways to increase wealth, if you have diligently saved up the resources to invest.

Paul Volcker is a retired Federal Reserve Chairman who destroyed massive inflation buy attacking the American Standard of Living using massive interest rates. He stopped trying to fix the economy, protecting jobs, and economic stimulus. He made everyone suffer which solved economic problems.

On Charlie Rose are answers to aimeecc questions. There are no sound byte answers. These notes from his discussion are some of the best answers that aimeecc might get.

Financial crisis is due to excessives in mortgage lending.

Federal Reserve action raises questions. Function is to provide liquidity to the financial industry center.
Now they stepped in to save Bear Stearns that was highly (excessively) leveraged. All investment banks are highly leveraged and interconnected. Federal Reserve now lends to investment banks - a major change. Is it wise? Could we have risked the demise of Bear Stearns? Unknown because all firms are so interconnected and also highly leveraged. So this is a test of a new financial system where banks are no longer the dominate center of our financial system. Investment banks are now larger, mostly unregulated, especially since SEC (ie remember Harvey Pitts) does little to no oversight.

Fed Reserve was not conceived as a place to put bad assets. Now that is what has happened. (Something like 50% of the Feds budget may be tied up with questionable mortgages.) Fed is taking over bad assets from these highly leveraged investment bankers. Volcker says this is wrong in the long term. Federal Government (Treasury) did not step in because government currently has no tools. That should change.

Freddie Mac, et al are government institutions intended to solve mortgage problems in times of stress. But for 1970 budget games, Freddie Mac became a big private intuition torn between whether it is a profit center or a mortgage solution organization. Fed had to step in because nobody else could (or would) - ie Freddie Mac and Sally Mae. That should change. Freddie and Sally have direct credit lines to the Treasury that were not used.

All this should have been seen coming. We did not ask obvious questions because short term profits and low cost imports made everyone happy - unaware because we wanted to be. Financial situation was unsustainable. We have been consuming more than we produce for a long time made worse because foreign investment let us ignore these impending problems.

Economy not too bad, especially exporters. But we have lost manufacturing capacity. If we can get through this crisis, we will have a better balance economy. Question is 1) how and 2) how long the pain,

How? Confidence among asset holders is too low. Even Freddie Mac & Sally Mae should go out and buy back their own paper. Things would be worse if commercial banks were not properly capitalized.

We convinced ourselves that complex financial instruments created market stability. Literally mathematical models with no basis in financial reality were used to justify absurd conclusions. Mathematicians without financial experience were making predictions that others believed. Humans got too exuberant.

Having the dollar as a world currency has been good for everyone - as long as the US economy is stable. Things such as protectionism has been harmful. Off balance accounting has been harmful. Instability in America creates instability internationally. Even Swiss Franc is worth more than a dollar. US has ignored these international problems created by a dropping dollar. Dropping dollar made worse by lower interest rates and resulting inflation. Volcker specifically mentioned increasing food prices. These rates are no where near to what Volcker had to fix, but equivalent to what was starting in 1970 that created the problems he eventually fixed with 15 and 20+% interest rates.

How long to fix? Business firms are strong. Problems are only in financial institutions and housing. Rest of economy is still in good shape although economy may now be in recession.

Past recessions verse now - confidence has not been lost. Concern would have existed had Bear Stearns declared bankruptcy causing non-performance with third parties. Would it have created a panic? Yes or no - also called unknown.

People are paying high for credit protection. When that diminishes, then stability is being restored.

What we must do? Take a serious look at the entire regulatory system. Financial system is now doing excessive risk taking. Too much off-balance financial statements. Too many people getting highly compensated for taking risk without suffering from their mistakes - sitting happy in Palm Beach - including those who decide these compensation packages. Banking system does not have this problem due to proper regulation. But investment banking system has no such regulation and is doing so with better contributions to Congressmen.

SKF, SRS and others work for me.

I am definitely not an economic or financial expert. I save each month, invest into mutual funds each month. My usual is to not think about it.
But I did stocks a few years ago. Ok, like over a decade ago. I went with 3 big companies - Intel, Johnson and Johnson, and Mellon (now Bank of New York). I invested monthly for a while, then stopped. I didn't even watch it - just let it "grow" was my thinking. Well, it never grew. I think I made a very slight profit on two, lost on one. I finally sold it all in November to put in mutual funds.
So my experience is that if I wait, it will stagnate and not grow. So now I am worried that its useless in these mutual funds and I should go with something guaranteed - like a CD or money market. But those interest rates are pitiful now.

I don't know you or your specific situation so I cannot advise you on a specific course of action for your finances. That being said, CD's are the 3rd worst choice for long term money. (cash and money market go 1st and 2nd). Long term investors belong in equity mutual funds unless they have the risk tolerance and the assets to move into the individual equity markets. If you don't want to work with a trusted advisor and don't have the time to study your options carefully, look at some asset allocation plans offered by the major fund companies.
Look for:

-performance over 3,5,10 year time frames. Look for consistency, not stellar numbers.
-how long has the management team been there? Are they responsible for the performance?
-What was the best 12 month period the fund had? The worst?
-Cost? Sales load, annual expense, waivers, etc.

You're young. Pick quality investments and hold them until either YOU change fundamentally (retire, learn more, etc) or THEY change fundamentally (Management change, Prospectus change, Performance abruptly changes over 1-3 year periods.) Do not change investments based on the current state of the market.

Traders trade, investors buy and hold. Both work but they require different temperments and skill sets.

BTW lookout, thanks for the answers (both the long 1st one and the latest one). As I have said, I am no financial expert so I appreciate it when its in terms I understand.

Yes, I have time - both for retirement and little ones college. The funds I picked had good 3, 5, and 10 year returns. Low overhead. I didn't go with one of the huge names, but with my tried and trusty bank that at least makes the top 25 and has good reviews from Morningstar - 4 or 5 stars for all my funds from them. I like the ease at which I can access my funds, and not have to pay for trades (unlike Fidelity and others). I have 6 funds, and all but one have had a really crappy year. Of course, that can be said of the entire market.

I do have a doomsday cold war mentality. Both me and my husband. Our dream is to have a large tract of land with water so when it becomes anarchy from global warming and the mismanagement of the US we have a safe haven. With clear fields of fire. And ground radar to detect any movement on our property. Some place we can stay for 20 years without ever coming out until we need to kidnap a bride for our boy. lol.

ETFs were created just for you. Either invest in an entire industry (ie financial, semiconductors, retail), or invest in the S&P500, Dow Jones, FT1000, etc. Invest without an up to 2% charge for the industry professional who historically underperforms the market. You paid someone to run that mutual fund and what happened?

Index funds are mutual funds that remove the expensive professional and therefore outperform other types of mutual funds.

ETFs are how to invest just like an index fund usually with even higher returns. If you make 8% but pay the professional 2%, then what have you done? If you lose 4%, you still pay that up to 2% to that professional. Reality was stated bluntly by The Economist on 1 Mar 2008 entitled "Money for old hope: A special report on asset management" and quoted in Post 20

If you don't have complex tax problems. If you don't have a $million to invest. Investments that require little attention without those massive service fees. As The Economist said, "The fund-management industry has done very well - but mainly for itself" and "But whereas the clients have not always done particularly well out of the industry, the providers have prospered." Could they be any more blunt?

This is an excellent time to make decisions for your future. You would pay service fees to a professional who typically underperforms the market? Welcome to mutual funds that, "persuade their clients to select their funds on the basis of past performance, even though there is little evidence to show that this is a good predictor of future success."

Those who don't watch their investments are best advised to invest in indexed mutual funds without the expensive professional - without those expensive fees. Or buy a stock (called an ETF) that does same without the major expense of an industry professional - designed for investors such as aimeecc. ETFs have many names such as Spyders and Powershares. As the Economist noted, ETFs are the Wal-marts of investing. They were created for people who want higher returns and do not watch the market.

Industry professional don't like these ETFs because those service fees instead appear as profits for the investor.

The Economist was quite blunt about it: If you are not managing your investments, then ‘Wal-mart’ your investment in index funds. Even better than indexed mutual funds are stocks called ETFs. Eliminate the biggest expense that also historically underperforms the market - the expensive fund manager.

Ironically, if your doomsday scenario becomes evident, the US markets will crash. Perhaps you should invest in foreign markets.

if the US markets go, the foreign markets will also spiral until a new leader steps up. Foreign currency will be about as useful as domestic currency. If that is your concern you're better off investing in food, weapons, ammo, security systems for your land, and items that will be good for bartering in the new economy.

Or you can start preparing your doomsday safe house elsewhere - i'm thinking central america or australia.

Were considering Canada.
And of course, like any good American, we are prepared with weapons. lol Security system - definitely. Land to farm on, lake to fish in. Who could ask for more.
That's why we want to buy actual gold. Useful for bartering.

Well mankind has invented apocalypse stories since the very beginning, and only an extreme few have come true. There is something in human behavior that wants to convince you the sky is falling. Resist it.

Canada will not let you bring in guns. They are very strict on gun ownership.

Meanwhile, some great investment possibilities currently or will soon exist - for those who do not entertain fears of the second coming of Christ.

Oh, you're back to talk about investments again?

In May 2004, these same investment concepts were discussed. Two posts that discucss how to invest were Portfolio 101 and Portfolio 101 [quote]Market professionals are too buy selling themselves rather than learning what really makes a good investment. There is great profit in selling themselves because so many laymen think you must be an economist or some kind of professional investor to invest in stocks. ... Listen to what he says. If he hypes cyclic trends and capital expenditures, then run. However if he talks about the company product and industry trends, then put his stock in your basket of 'stocks to watch'. ...
In May 2004, these same investment concepts were discussed. Two posts that discucss how to invest were Portfolio 101 and Portfolio 101 As usual, the emotional make claims without even stating a single reason why: and How do we know both have not a clue? Both would attack the messenger AND both would not provide a single useful fact. How curious. Extremists also do this.

Well let's see what happened to Onyxcougars investments.

Initially were investments in Dodge & Cox Stock Fund (DODGX) and Dodge & Cox Income Fund (DODIX). Apparently after professional advise from elsewhere, the Stock Fund was eliminated. Added were
Dodge & Cox Income (DODIX)
Vanguard Morgan Growth (VMRGX)
Vanguard Wellington (VWELX)
Vanguard Total Stock Index (VTSMX)

The eliminated Stock Fund outperformed the market over four years. But all non-indexed funds in the new portfolio, except one, underperformed the market constantly over those same four years. The only index fund (fourth down) outperformed the market. Eliminate the index fund and the entire portfolio of professionally managed funds is tragic.

Blue line is each fund over the past four years; red line is the Dow Jones Industrial Average. Below are DODIX, VMRGX, VWELX, and the index fund VTSMX:

UT selected a fund apparently using Vanguard's fund picker (not using professional advise). Well UT outperformed the market; if he got out on or before the end of last year.

Unfortunately, if UT did not get out last year, then he underperformed the market AND lost all four years of profits. Had he invested in a DJIA or an S&P500 index fund (funds without experts selecting the investements), then UT would have outperformed the Vanguard Strategic Equity fund. His investment was no better than an index fund starting Jan 2007 and then became worse than an index fund on Thanksgiving 2007.

Again, the chart is the past four years with VT's fund in blue and the DJIA in red.

In that same discussion were a cross section of stocks:
Microsoft (MSFT)
Intel (INTC)
Nokia (NOK)
Amazon (AMZN)
Adobe (ADBE)
Qualcomm (QCOM)
Cisco (CSCO)
Juniper Networks (JNPR)
Warren Buffet's Berkshire Hathaway (BRKA)

As Peter Lynch noted, most will mimic the market, one may be a dog, and one will be so good as to make the entire portfolio profitable. Observe with care. For example Intel (second down) looks like a large loss. But it is only 20% down. Next stock, Nokia, looks like a small gain but is really 50% up.

This 'basket of stocks' duplicates what Peter Lynch stated and demonstrates how a simple cross section of stock typically outperforms professionally managed mutual funds. Notice the performance of Nokia, Amazon, Adobe, and Qualcomm (until it started losing lawsuites). Even the legendary Berkshire Hathaway is only an average performer in this portfolio posted four years ago but better than the non-indexed mutual funds.

Meanwhile, why would anyone even waste one dollar on a lottery ticket? Why would anyone invest in a losers proposition?

Blue is each stock as posted four years ago; red is the DJIA:

Lynch's strategy makes sense, as it did when he first wrote it, what, 20 years ago? After learning it as a manager of funds...

But this handful of stocks has a problem: they are all in one sector, technology. If you had looked at a different time frame, say the time frame ending in the dot-com bust (to be a little too obvious), they would all be dogs and you'd underperform the funds.

Ideally your handful includes stocks in many sectors; it is exactly the same strategy as W.Hi.P's defencive betting schemes in the "Betting tips" thread.

BTW I got out of VSEQX about two years ago. But not for good reasons.

Point of order: As I pointed out in the other thread which I linked above, you are using accurate numbers to support inaccurate assumptions. Not a single one of those funds is benchmarked to "the market" represented by the S&P 500. They each have different uses in a portfolio.

BTW, and index fund can't outperform the market unless A) you're measuring it against the wrong index, or B) it has drifted away from mirroring it's designated index.

But, hey - i really like your hammer. Unfortunately, every problem is not a nail.

The dot.com crash hit everything. For example, Ford and big pharma also suffered. How are autos affected by computers? Well major downturns tend to take all down. Whereas the downturn was larger among the dot.coms, still the downturn was mostly with stocks not on my list. Notice how those stocks mostly followed the DJIA down meaning most all stocks took a hit.

Viewing aimeecc's three stocks demonstrates the problem. J&J, Intel, and a bank was a diversified portfolio and a prescription for failure. A typical and diversified investor would not understand all those industries and their products. Bad news is to invest in industries not understood; which was the point in Portfolio 101. Investing without grasping the product is why one should invest in one stock in his early twenties so as to learn the 'feel' of how it works; to learn using money that is most precious. I believe most everyone loses on their first investment - which is necessary to understand investing by 30. aimeecc's other mistake was to ignore those investments - not learn from them. We make mistakes to learn.

Peter Lynch talks about investing in things he understands such as retail that his daughters and wife preferred shopping at. Warren Buffet makes the same point. Buffet's closest friend, Bill Gates, repeatedly tried to explain the computer technology. Warren refused to invest. Buffet is another famous investor who invests only in what he understands such as MacDonalds, Dairy Queen, Coke, a railroad, etc.

aimeecc violated principles in Portfolio 101 and Portfolio 101. Intel was a very bad investment if the computer industry was not understood. Bank of NY also a poor investment for same reasons. Even if one hits the lottery does not make it a good investment. The good investment is not about luck.

Big and famous name is not sufficient to judge a good stock. Using that strategy means GM is an ideal investment. After all, see all those GM cars? Learn the failure of that reasoning as demonstrated by GM's stock for the past 20 years. GM products have been that bad that long. One cannot invest using a product oriented perspective if the company and its products are not understood.

Diversification is overrated. Yes, if one can diversify, then by all means do so. I also understand cars - so I can diversify. But back then, I saw no good auto investments. If diversification means investing in industries not understood, then diversification would only pervert the investment. If one needs diversification, that means index funds and ETFs. Those are the only way to diversify and not get punished because the investor does not understand each company’s products.

One previously forgotten point: returns did not include another profit - dividends. Most of those examples did not have dividends. But those few dividends actually pay the rent.

To be diversified, one must first learn about other industries. Being diversified in other 'unknown' industries is how to lose. Meanwhile, notice how all those stock in one industry - when one was down, another was up big time. Even though all were in a same industry, all did not rise and fall together. Being in various aspects of the same industry was diversification.

:lol2:

The economy is in trouble... must be a shortage of cash, because Atlantic City has just added $25,000 chips.

Here's an excellent explanation about the price of gasoline.

If oil went from $10 per barrel to $100 per barrel, why did gasoline not increase by a ten factor? Because most parties along the pipeline have not shared in the wealth.

Sir Richard Branson noted what has happened. A massive percentage of the world's wealth is currently being transferred to other nations. According to Branson, he has seen this happen three times including in the 1970s. But he has never seen so much wealth being transferred so quickly as is ongoing today.

Our extremists (in denial) said our economy is not as dependent on oil as it once was. That works when preaching to Rush Limbaugh disciples. Those who instead need facts: we will see. Price of oil has increased massively for only a few years. That means the economic response has not yet been observed in spread sheets. Or has it?

Recommended in 'Portfolio 101' is to first identify one who is dealing with reality rather than selling finance myths. The product is everything when doing long term investing. One example of a perspective based in facts rather than one steeped in finance games. Depew offers examples of investments based upon current economic conditions. His reasons for making these investments are based in product thinking. His recommendations would have been reason to watch and learn from his recommendations; not a recommendation to blindly invest upon.

Like just before the conventions until after the election.

Oh, and beyond.

I dealt with this fallacy in the previous thread that you were unable to respond to. Not that I expect you to actually objectively read what anyone else posts.

I liked your first explanation better xb.

I have a few questions?
As I've worked in oil related Fields all my life.
Around here they're laying 42" lines, That I think cost 1 million bucks a mile.
My oldest son is number 2 man over the environment shit. They get paid for, 4 whellers, cell phones, cameras, per-deim. God only knows what else.
He makes around 2k a week and most of that is tax free.
#1. ? Where did the products suddenly appear from? My guess, is that they were waiting on an a bunch of thieves!
#2 There's more than 28K mile of pipelines in the works. Where did this great supply come from?
#3 Whom do you think will pay for this?????
Bet your ass, it won't be this bunch. Hi DICK!

Is that oil? Or is that the new natural gas pipelines to deliver tankers of natural gas to the Northeast and Midwest?

Gulf have the only ports (except Boston) willing to accept liquified natural gas ships. Jersey wanted to do this on Delaware Bay. But the state of Delaware owns all water right up to NJ beaches. DE quashed that natural gas port. So tankers must download gas in the Gulf of Mexico where it will be piped to midwest and NE consumers.

Everything you posted had been answered in posts preceding. Meanwhile, four years of data and other sources demonstrate a fundamental fact. Stock brokers, on average, underperform the market. Index funds and ETFs are how to match the market. Legendary investors such as Warren Buffet and Peter Lynch describe how to beat the market - know the product and its industry.

Even the cable guy (whoever that showman is) that does Mad Money says better investment information is found on the front page of the NY Times; not in financial publications. Why? Product information is more often discussed there.

More facts that potential or learning investors should know. From The Economist of 22 Mar 2008: Again, think product. During this period massive innovations including, so many pioneered and stifled in the 1970s, suddenly became hot and profitable marketable commodities. Innovation was similar to before, during, and after the 1950s. Expect growth rates to return to more traditional levels. Suddenly those high fees (ie 2% management fee on a mutual fund) removes a massive portion of those expected returns.

Even Wal-Mart has reorganized for a potential downturn. Investors might do same with Wal-mart style investments using index funds or ETFs and using discount brokers. With reduced growth expectations, management fees cost too much especially when those industry professionals, on average, underperform the market.

Do you have major investments and complex tax problems? Then industry investment professionals have a purpose. Tax laws, in particular, are so complex that even the better legal minds and lawmakers don't grasp them all. Common investor does not have these (unnecessary due to politicians) complex problems.

You, sir, are a liar. I know it. You know it. Everyone who has bothered to read the threads knows it. You are a little bitch who throws around figures and your opinion demanding that others accept it as fact because you type it over and over again in your broken english without any consideration that you might be incorrect. When an alternative view is presented you attack the poster in your punkass passive aggressive manner. When they respond directly to your posts you throw a hissy fit about their emotional stability to draw attention away from your inability to support your ideas with relevant facts. When someone asks you a question you only have two responses, A) quit visiting the thread until you think people have forgotten about it, or B) you puke out irrelevant crap about GWB and mental midgets.

TW, I'm calling you out. You're a liar. You're a pussy. You've got no spine. You've got no integrity. You're the type of chickenshit that in real life wades into a discussion spouting bullshit only to piss down your leg when someone with integrity and a brain questions your ideas. TW, you are my Bitch.

I challenge you right here right now to refute what I've said. Sadly, I don't think you have the cajones to even try. I expect you'll respond with some drivel about emotional posting and insults. Sadly, you'll be wrong about that too. I'm not angry or upset. I'm weary. I'm saddened that new dwellars will see your post count and seniority in the cellar and be lulled into thinking you are worthy of respect. I find myself puzzled that a ridiculous little cunt like you has managed to survive in the cellar this long without running off in a temper tantrum. Then I remember that you're so disconnected from reality that you probably don't even realize what a pathetic little fuck you are. I'm sure that next you'll spin off into half-coherent gobbledy gook and pretend that it is perfectly logical. You'll sit smugly and think about how you showed me. You pathetic, delusional little bitch.

Go ahead, show me I'm wrong.

You are a stock broker. Lying is part of the job. I understand from where your bias comes. Meanwhile, your mutual fund recommendations were losers. Even UT's choice outperformed you recommendation. When you want to become civil again, let me know.

Stock brokers, typically, underperformed the market. But then I had advantages. I learned from history, Peter Lynch, The Economist, and a long list of other sources that all said same. I don't care that lookout123 hates it. Reality is not something you have to like. Reality is something that you should learn to accept.

Why does lookout123 dispute so many honest sources? Does he provide facts? Lookout123 - you are a stockbroker. A saleman selling Dr. Miles Restorative Tonic. You don't have to like it. But that is what finanical advisers do best - sales; not finanical analysis.

It was an old ABC News report. Two people apply for the same job. One clearly had a better resume, education, experience, etc. The other was better looking. Comments such as 'He even looks like a broker' choose the good looking applicant over a far more qualified, educated, and accomplished applicant. Stock brokers are most about image. Get over it. Stock brokers, on average, underperform the market. Brokers are too often about selling themselves. When cornered by reality, a meltdown? Get over it (or did you find a copy of the oldest thing in my refrigerator?)

Congratulations pussy, you've fulfilled my very low expectations of you. Coward.

Our Govt taxes the bejesus out of petrol (gas).
I don't mind because I don't drive.

BUT
without wanting to give in to my Chicken Lickin impulses, I am worried about the grain shortage. I don't mind for myself if the price of bread goes up. Or even chicken. But if it gets to the point where poorer people start going hungry... Well. KFC might go out of business.

As you were - I did follow the intelligent discussion with interest.

I don't know if this is common, but it would be a huge mistake, on the readers part.

Neither seniority, nor post count, adds one iota of credibility to any post. I've seen members contribute brilliance in their first post and others just shit out hundreds, before ringing the bell.

Every post stands on it's own merit.

Tw, I suggest you re-read the Portfolio 101 thread. Depmats made a flippant comment to which I challenged him to refute your statements...IOW, I was defending you, you silly goose!

To answer your question, aimeecc, I am not scared when I stop to think about it: the way my ancestors lived, the starvation they faced, the grinding poverty, the discrimination, the dirt, the lack of education. Most of the world lives on a lot less than I do. I'm poor, but I've never been homeless or hungry (thank goddess) and man, I hope it stays that way. Trust the universe---it's always been very good to me even when I thought it was going to kill me. :flower:

(I am a :flower: girl today)

tw: make love, not war. :)

:flower: :flower: :flower: :flower: :flower: :flower: :flower: :flower: