opinions on the stock market?

[Michael]

I don’t rant too often, but after today’s financial news I can’t contain the impulse....

 

To all the reasons that folks lose the opportunity to build their V8 Z’s – divorce, poor health, job loss,... may I add losing one’s life savings in the stock market? This market is really going beyond the ridiculous. It seems to me that we have the dubious privilege of living through the greatest financial collapse in human history. The wealth of a generation, down the toilet. Is there anyone on this board old enough to remember the 1920’s? Anyone? Anyone’s parents, maybe? Please, please tell me that the 1929-1932 crash was even worse than what we’re going through now. And please tell me that there was a recovery….

[Mike kZ]

I wasn't around in the 20's, but the stock market did come back and then some. If you have money in your 401K or 403, don't touch it! Don't forget that as the market is low you are buying more for your money right now. When the stock market finally rebounds you will have more shares, because you bought low. So hang in there it will get better!

[Mikelly]

I agree with Mike KZ... If you want to further throw money down the toilet, go ahead and start moving it around. As one financial advisor stated on a radio talk show I was listening to the other day, If you absolutely HAVE TO DO SOMETHING WITH IT, then take a loan out against it and buy land or a house or rental property. At least then you will be paying yourself back SOMETHING (Usually about 6-11%) on the loan of the funds, and hopefully getting something in the return on the investment... Apparently this is starting to become a trend, although I don't recommend it unless you don't have ANY other way of buying realestate property. It could get a lot worse, but right now is an excellent time to take a little "Play" money and invest in the NEXT Microsoft or Pepsico...

 

Mike

[Lockjaw]

The hardest thing I think for the average Joe (myself included) is to watch your investments decrease in value. It is hard to keep investing, and it is hard not to take your money out, but you have to do it. Leave your money alone, you will kick yourself later when the market rebounds.

 

I am like you watching all this money I have put into the market decrease in value. I changed jobs last year and lost 20 % on my 401K because I had to get out of it. I did not have enough time in to leave it intact with the broker, so I had to have my financial advisor roll it over into an IRA. That is not even figured into what I have lost since the market started going down.

 

I am heavily tech weighted, or I was I guess. I am sure some of the funds I am in have started to move their incoming moneies into better performing area's.

 

Just try and remember this. We had 8 years of democratic leadership in the white house, and we are starting to see the results of that. It took Regan a while to get the economy turned around. It will take Bush a while too. When it does come around, hang on, you will make your money back in spades.

 

What I plan on doing is taking some of that growth off the top and putting it into stocks that pay dividends, and have the dividends reinvest. Then in 25 years or so when I retire, I should have enough shares of those stocks that I can live off my dividends. Hopefully anyway.

 

Buy low and sell high is the hardest thing about investing. Follow it and you'll be rich, be like everyone else and you will lose your shirt.

 

Stick with it man, we are all in the same boat.

[Pop N Wood]

Yeah, that is what all of the experts say. Invest for a period of years and historically the market has returned double digit returns.

 

Hard to do when you see the balances dropping like a congressman's pants at an intern party.

 

As for the 20's, they say the market is a completely different now. Back then it was easier to buy stocks based on speculation (read money you don't have). They say the laws are such that a 20's style crash can't happen again.

 

I will probably just ride out this downturn, but like you I wish I had a better idea of what to do.

[johnc]

WSJ - PLAIN TALK

By DAVE KANSAS

 

The Buy-and-Hold Mantra Deserves Closer Examination

 

"Buy and hold" may be the last undiscovered scam of the bubble era.

 

As investors cottoned to the stock market in the 1990s, professionals offered basic advice. Buy and hold for the long term. Stay the course. Buy the dips. Never surrender.

 

One of the great surprises of the stock market's downturn is how investors have clung to the buy-and-hold theme even as their portfolios have crumbled. Equity fund inflows were positive in 2001 and remain positive this year, even though the stock market is on the way to its third-straight losing year for the first time since World War II.

 

But late last month Barron's, the financial weekly published by Dow Jones (publisher of this Web site), finally said what must be on just about everyone's mind. "The buy-and-hold mantra that was drilled into investors' psyches by the bull market of the '80s and '90s no longer leads to nirvana."

 

Indeed not. The defrocking of buy-and-hold is just the latest bodyblow for individual investors. Already, they've endured Enron's stealthy books, Merrill Lynch's double-talking research analysts, Arthur Andersen's shredding, Adelphia's crony capitalism and, most recently, WorldCom's explosive confession of book cookery that may top all lists. Now, the received wisdom of buying and holding is no longer the sure thing it was sold as. Individuals who have steadfastly bought and held this market right down into the sub-basement (think dollar-cost averaging and auto-investing -- the ultimate tricks of the buy-and-hold trade), may finally be realizing that they're the last ones holding the bag.

 

The buy-and-hold strategy stems from the concept that timing the market is impossible. Underscoring this notion are data indicating that gains in a given year usually fall on a small number of days. For instance, the one-year return after the 1987 market crash was 23.1%. But if you didn't own shares on the five best trading days during that 12-month period, you would've had a 6.8% loss. Buy-and-holders, since they are always in the market, don't miss those days.

 

The buy-and-hold philosophy also argues that stocks go up over time. According to data from Chicago-based Ibbotson Associates, from 1926 to 1999, 90% of five-year periods were positive for stocks. But those figures don't reveal long periods of pain in the stock market. After the 1929 crash, the Dow Jones Industrial Average took 25 years to regain its pre-crash levels. The Dow traded above 1000 in 1968, but failed to close above that level again until 1984.

 

Finally, buying and holding ostensibly applies differently to stock investors and fund investors. For stock investors, buying and holding makes little sense, since companies and trends change over time. A stronger case can be made for buying and holding an array of diversified mutual funds, especially since fund managers are not likely buying and holding forever but are continually monitoring and updating their holdings. The idea is that you minimize the risk of staying in the game by spreading your assets among a number of investments.

 

But even with funds, buying and holding is no elixir. You could buy and hold the life out of an Internet fund, but that won't make it come back to life. And with many folks talking about a lengthy weakness in technology, does it make sense to buy-and-hold tech funds, or "diversified" (read: tech-heavy) funds for that matter?

 

The fund industry would prefer you not question too much the buy-and-hold concept. By getting investors to buy and hold for "the long term" (forever?), fund companies generally amass assets and book a nifty piece of revenue via their asset-management fees -- a percentage that keeps on taking no matter what the fund's performance. It's no wonder that just about every fund manager on television, in newspapers or on the Internet frequently extols the virtues of patience and the buy-and-hold strategy.

 

"The investment managers, the fund world, clearly has a vested interest in telling people to stay the course, to buy and hold, because they make a lot of money on the assets they have under management," says Jeffrey Bronchick, chief investment officer at Reed Connor Birdwell, a Los Angeles investment firm. "The fact is, buy-and-hold is not that easy a system. The reality is there are far fewer companies that are buy-and-holdable than there are publicly traded securities."

 

So how did buy-and-hold become such an unquestioned piece of received wisdom? Like just about any strategy, it worked when the market was going up. Stocks rose for such a long time that the buy-and-hold concept seemed flawless.

 

Like much of what happens in the market, though, we've been through this before. It's only remarkable that so many are holding onto this game well after its failure. The so-called Nifty Fifty stocks of the late 1960s and early 1970s were "buy 'em-and-forget 'em" stocks. But that idea died a quick death after the market decline of the early '70s. Trading volume slowed to a trickle on major exchanges, and mutual funds suffered five consecutive years of net redemptions during and after the Nifty Fifty's collapse, according to the Investment Company Institute.

 

Nifty Fifty sounds like a lotto game to most people in today's market. But long memories are invaluable when it comes to evaluating investment strategies.

 

"Buy and hold? I got my lessons in the early '60s," wrote Howard Garrison, a retired oil and gas engineer now living in Spain. "I bought and held and kept buying a company called Yuba Consolidated Industries until I got a letter which read: 'I am Francis Xavier McGillicudy, trustee in bankruptcy. The first item is my fee.'"

 

Like many of the shortcuts we took during the bubble era, buy-and-hold is actually a rather evil truncation of an intelligent investment strategy. The best way to think about it is buy-and-watch, or buy-and-beware. You could have bought and held WorldCom with great gusto. But that wasn't stopping the stock on its trip to oblivion.

 

A potential variant on the blind buy-and-hold concept is to buy good companies and hold them. The challenge is in identifying good companies, and that takes watching too. Sun Microsystems, the server giant, was a worldbeater three years ago. A recent story in the Economist raised issues about Sun's survival; its shares, $5, trade roughly 90% off their highs. Over the longer haul, only one company from the original Dow Jones Industrial Average is a component of the measure today, General Electric, though even venerable GE has had two stints outside of the average during the measure's 106-year history.

 

Debunking buy-and-hold is not the same thing as embracing wild-eyed speculation. Often investors get lost in this Manichaean view of Wall Street. But buy-and-watch means that you make sure your portfolio remains diversified. For instance, if you were a true buy-and-holder, the boom of the late 1990s meant, inevitably, tech and growth became an outsized part of your portfolio. A buy-and-holder would have ho-hummed and gotten crushed as the bubble burst. A buy-and-watcher would've rebalanced -- even selling part of a tech-bloated S&P 500 index fund -- to cushion the portfolio from the implosion of the Internet and tech bubble.

 

The buy-and-hold chatter of the past few years has many individuals peeved. Todd Johnson, an investor who lives in Denver, wrote to say he feels "burned" by the continuous drumbeat of buy-the-dips or buy-and-hold for the long term, especially now that the market has fallen on such hard times.

 

"All I hear is 'stay the course' from John Bogle types," wrote Mr. Johnson, speaking of the founder of the Vanguard Group of funds, known for its index funds. "I'm sure their thoughts are well-intended, but inaccurate in hindsight."

 

For Mr. Johnson and others, the buy-and-hold mantra seems more a feel-good nostrum than an effective strategy. Still, some individual investors continue to cling stubbornly to the buy-and-hold thesis. (To see their comments, click here.) Perhaps they'll be vindicated. The question is whether they can hold on long enough to find out.

 

Write to Dave Kansas at dave.kansas@wsj.com

 

Updated July 9, 2002 10:44 a.m. EDT

[pparaska]

Thanks John. Maybe I'm not so stupid after all. I moved my active retirement account money out of a bunch of LOSING tech heavy funds in Vangaurd and moved to ones that have done well (Gee, most of them start with the letters "WEL" also ) over the past 10-20 years, and haven't been STOMPED horribly in the past year or so, like the "value" type funds I was in before.

 

My Merrill Lynch advisors are telling me to keep IRAs from a previous job in the tech/pharmo funds and bonds mix they're in. They continue to inch downward and are worth 2/3 or less of what they were 3 years ago when I dumped my Thrift Savings Plan accounts into them. I think I'm going to call them and talk about the farce of "buy and hold".

[BLKMGK]

Buy and hold - great philosophy I bought into when an analyst was "churning" my account. Beig in the "tech sector" myself I went tech heavy

 

My 110K+ account now stands at about 25K. Think it'll come back? Go lookup Winstar, Worldcom, Rambus (knew that was a risk), Microsoft (10K of my own funds - bought at $99 - do the math), and a few others like Corning and AMD are kicking my butt. Several of those will NOT be coming back and I have lost everything I invested in them.

 

Buy and hold only works if the companies stay in business and don't cook their books. As an investor I'm PISSED at the likes of Worldcom (who at least turned themselves in), Xerox, Arthur Anderson, and a few choice others.

 

Luckily in the midst of this I changed companies 3 years ago. The money from the previous 10+ years (I always max 401K BTW) may be toast but the new company has an excellent setup and I've made up a big part of my losses. I'd be doing much better if I hadn't lost the other money and I still hope some of it comes back as I ride that ship straight downwards. My broker says nothing liek this has been seen since the first crash.

 

The difference now, as I see it, is we've had a culture that has pushed CEOs and others to cook books in order to make bonuses etc. and they have truly hosed the investors. This is FAR different than investors overextending themselves in a buying spree, this time we've got books we cannot trust when making our investment decisions. Oh, while we're at it let's talk about professional brokers who push stocks that they privately call "dogs". So IMO we're in deep doo doo and investor trust is spiraling downwards - I know I will be hesitant to dump anything more of my after tax money into the market.

 

P.S. Anyone catch the Washington Post the other day? Our Prez is coming down on low interest company loans to company officials and pushing legislation to stop it. The problem? Seems companies HE RAN in the past did the same thing. Gee, which side of his mouth is he talking out of with such indignation?

[Kevin Shasteen]

I am glad this topic came up. At first I was not going to say anything, but since JohnC and a few others pretty much posted my sentaments to a tee; I guess I'll chime in.

 

The first post asked if anyone remembers the crash of 29. No, I dont as I was not born yet, but, I have read extensively about it. The crash actually didnt occur in 29 but a few years prior to that. It always takes the market a few years to depressurize due to the Hype of Wall Street's "Buy & Hold" frenzy, or "Buy Now While Everyone Else is Selling"; then once enough shares are bought up the company goes belly up & leaves you holding the bag. Seems that some things never change.

 

Anyway, as I started to say, our market actually crashed in Oct.97. I dont remember if it was early Oct. or late Oct; but I do remember hearing that the market plumeted three times so severely that the alarm sounded and stopped all trading; this took place three times that day. On the third time the market was closed early for the day. Some would argue the alarm is a good thing [as it stopped the market from crashing]; but, I would argue if you are controlling the market's ability to depressurize its inflated trading, then is this not manipulation of the market? And if this is "Manipulation" then someone is gaining from its "Manipulation". If someone is gaining then someone else must be losing. Money is never lost; it is only converted in to someone else's pocket.

 

Anyway; once I saw that Oct.97 incendent I knew it was only a matter of time; that was the "Writing on the Wall" for me. When all my friends where I used to work (prior to the layoff) were continueing to sink everything they could into the Inflated Market; I made sure I had nothing in it. Was this going to extremes? Maybe. But I'ld rather have nothing in extreme to lose due to a huge bubble implosion than have invested heavily & lose it all, never to gain it back or merely gain a little back. BTW, this bubble implosion we're experiencing is the bubble many writers have been writing about since the mid 80's. They were the doom and gloomers that everyone brow beated into submission. Seems they were right after all; only 15 years to quick to sound the alarm, go figure; could this be due to a Manipulated Market as mentioned earlier?

 

I get so sick of the Wall Street crowd going thru their Hype one day because the Market has corrected itself a few hundred points; only to see it go back down next week an equal amount of points....and then some. Then the next day; THE MARKET IS UP 50 POINTS: COULD THIS BE THE TURN AROUND EVERYONE IS LOOKING FOR, BETTER BUY NOW!! It drives me up the wall (as in Wall Street), pun intended.

 

Back when I was receiving a $250 a year ecomomic report, I remember a few times where they mentioned a possibility of the Euro Dollar in the works. Economist then speculated that if and when the Euro became a reality, and if and when the Euro gained popularity; the US and its dollar could see a major economic turn around. Couple this with our current Fractional Bank Reserve System; our Inflation is to the point that it is out of control. All that it would take for consumer confidence to go down the toilet would be a few financial catastrophes or an event (such as 911) to cause a knee jerk reaction, which in return would effect the economy. War time never seems to have a positive effect on the economy either.

 

So what is the answer? I dont know. It is my utmost humble opinion that we have a lot further to go before our market hits bottom. As JohnC said, the "Buy & Hold" is only good for those that have something to gain from you! The companies that are cooking their books, the stock market that manipulates its true status, and the confidence of the consumer (or the Lack of the Consumer) are variables that have been at odds from day one.

 

I can only say if you are going to invest-dont buy into the "Hype" of investers; it is beneficial to them that you concede to their demands/requests. Do they not make a profit off of you when you follow their dictums? If they make a profit off of you then possibly their goals are not the goals that are looking out for your best interest.

 

As JohnC said earlier, what good does it do to "Buy & Hold" even if it is in a good company and that "Good Company" is on its way down; while only the insiders know that it is on the way down & they quietly sell their stocks while you are "Holding" onto yours(?). Good is a relative term. I do know this, even tho I was laid off by GM twice; I do know that GM was the only company that didnt lose its shirt at the end of WWII. Simply because they were so diversified.

 

Maybe that is the answer; to ensure that you are diversified. That is my .02c's worth; yes you can give me my .01c's worth of change back if you like.

 

Kevin,

(Yea,Still an Inliner)

[kalium99]

Yeah these days it seems to be a bit turbulent, especiallyin the US market.

 

A lot of big Companies have been going belly up, and Im sure a lot more will.

 

Internally you could see the signs of Wcom, going down a long time ago, LOTS of the honcho's were leaving Wcom all around the world. In Fact I used to be a contractor working in Wcom and lost my Job with them about 5 months ago because of the downturn.

[MYRON]

I am in the technology sector and it came on so strong with the y2k bug thing that most people upgraded their systems at the end of 99. The technology market since then has plumeted and from what all the mfg's that I deal with that are still in business are all still saying that the light at the end of the tunnel is the train coming this way. It stinks! Since Y2K came around my salary has dropped a total of 43K in less than 2 years, not to mention my 401k that was all tech based went down the toilet to the point where I

had to cash out. I had to sell my Z, my ATV, my guns, most of my R/C Airplanes pretty much everthing that was not a necessity had to go. I am looking for a change of industry and I am starting this monday! Unfortunately I will be selling some equipment that no one wants, but shops have to have... emmission system testing equipment. Fortunately I will also be selling cool stuff like lifts, tire changers, wheel balancers, pipe benders, and all the cool Timm Allen type stuff... So if anyone of you guys own a automotive service shop, look me up!

 

Myron

[Guest Anonymous]

The market has been over valued for some time.

 

Stocks have not been trading at a real value for many years. Just look at the P/E ratios and the market capitalizations. I did not buy into the new ecomony theory by buying any single tech stocks, but my mutual funds and 401 K funds were holders of these securities did take a beating.

 

I too feared the bubble may burst, but was too gready to leave with what I had.

 

The buy and hold, dollar cost averaging, and you don't loose to you sell are all theories developed to sell stocks.

 

One the bright side I was lucky enough to have something to loose. I am lucky to be an American, I am lucky to always have hope.

 

There will always be opportunities. There will always be risks. I would not have it any other way.

 

Our True New Worth and wealth should be measured by our health, families, and our number of real friends.

 

I am glad that we can all come together and share our experiences as well as our dreams.

[Guest zfan]

Amen to that! The Market has a ways to go before it stabalizes. There are alot of companies doing poorly right now and you can bet we have not seen the end of accounting discrepencies. I for one believe we still have alot of shaking out before we get all the bad apples out of the tree.

 

Mike