Stock Market Plummets: Falls to levels not seen since 1997.

[trule]

Agree.

Stocks have routinely gone up around 8-9% per year over the long term. Stocks do not always go up. They fluctuate in value. As long as your investment horizon is 10 plus years, you should be okay. If however, your investment horizon is less, then your funds should have been diversified into other more secure investment vehicles. The recent market movement is the reason why.

Lets see, I invest in 1997 and now, 12 years later, I show no gain. If that's not good enough for you then look over at Japan. 8-9%, over the long term, sure

This buy and hold is Wall Street talk designed to keep the greater public (you) in the market while big money (them) take profits.


Here is a quiz, if you invest in a stock (or market) and it falls in value by 50%, how much does it have to perform before you recover your losses? And again if it falls in value by 75% or even 90%, how much does it have to perform before you recover your losses?

And based on your 8-9%, how long will it take you to recover those losses?

 

[CalPoly10]

Lets see, I invest in 1997 and now, 12 years later, I show no gain. If that's not good enough for you then look over at Japan. 8-9%, over the long term, sure

This buy and hold is Wall Street talk designed to keep the greater public (you) in the market while big money (them) take profits.


Here is a quiz, if you invest in a stock (or market) and it falls in value by 50%, how much does it have to perform before you recover your losses? And again if it falls in value by 75% or even 90%, how much does it have to perform before you recover your losses?

And based on your 8-9%, how long will it take you to recover those losses?

Good luck making money my friend. It sounds like you are scared to play the stock market.

Do you realize that just about every rich person in the world plays the market?

It's really not difficult.

For example, AT&T pays roughly 8%/year dividend right now. So, let's say you invest $10000. You get roughly 400 shares, and you're getting an additional $800/year just to "own" the stock.

Now, let's say you reinvest your dividends every year, and pick up, say, an additional 20 shares of stock.

5 years later, you have 500 shares, and AT&T is up just 5 points. You've turned your intial $10k into $15k.

50% in 5 years. Wow.

And if the stock goes down? Hold it, keep the dividends. In those 5 years, you'd have made nearly half of your original investment back

 

[trule]

For example, AT&T pays roughly 8%/year dividend right now

Thanks for the lesson on dividends, I really had no idea about that Lets see how AT&T dividend holds up, so far the stock is showing a 50% loss from its 12 month peak. Currently (last quarter) their expenses are increasing faster then their revenue and their EPS fell 20%.

Looks like a great investment


Really rich people know how hard it is to recover from a 50% loss so they keep out of the market most of the time. Actually, they make their money IPO'ing private companies to people like you and me. Otherwise they stick to treasury bonds because they know how hard it is to recover from a capital loss. They understand risk and they don't need to invest to get rich...they already are rich!

They also have a much greater appreciation of market history, i.e. before 1980...

 

[CalPoly10]

Thanks for the lesson on dividends, I really had no idea about that Lets see how AT&T dividend holds up, so far the stock is showing a 50% loss from its 12 month peak. Currently (last quarter) their expenses are increasing faster then their revenue and their EPS fell 20%.

Looks like a great investment


Really rich people know how hard it is to recover from a 50% loss so they keep out of the market most of the time. Actually, they make their money IPO'ing private companies to people like you and me. Otherwise they stick to treasury bonds because they know how hard it is to recover from a capital loss. They understand risk and they don't need to invest to get rich...they already are rich!

They also have a much greater appreciation of market history, i.e. before 1980...

You sure do see the small picture. EVERYTHING has contracted in the past 12 months. Many of the big companies have lost 50% of the share's value.

They've got largest national wireless network (the future), iPhone hundreds of thousands (millions?) of new iPhone subscribers on board, a great executive board, practically zero debt, etc.

Maybe you should look at a chart of the DOW over the past 30 years. There are peaks, and there are valleys (where we are headed, but not quite there). The general consensus is up.

You know what? I suggest you just put your money in a Bank Account, where you can get 2% interest on it every year. Then, when hyperinflation sparks (thanks to our pal Obama signing away trillions of dollars in "stimulus" and "nationalized healthcare"), your money will be worth even less.

 

[maestrokev]

Really rich people know how hard it is to recover from a 50% loss so they keep out of the market most of the time. Actually, they make their money IPO'ing private companies to people like you and me. Otherwise they stick to treasury bonds because they know how hard it is to recover from a capital loss. They understand risk and they don't need to invest to get rich...they already are rich!

They also have a much greater appreciation of market history, i.e. before 1980...

Exactly, really rich people don't make money just from buying and selling stocks, they make money from starting companies and running them. They find out before we do when a company is going to perform poorly and sell accordingly. By the time we see their SEC filings, they've got cash in hand.

Regular people make money from buying stocks in companies that rich people own and hope in god's name that they're not lying to us.

 

[maestrokev]

You sure do see the small picture. EVERYTHING has contracted in the past 12 months. Many of the big companies have lost 50% of the share's value.

They've got largest national wireless network (the future), iPhone hundreds of thousands (millions?) of new iPhone subscribers on board, a great executive board, practically zero debt, etc.

Maybe you should look at a chart of the DOW over the past 30 years. There are peaks, and there are valleys (where we are headed, but not quite there). The general consensus is up.

You know what? I suggest you just put your money in a Bank Account, where you can get 2% interest on it every year. Then, when hyperinflation sparks (thanks to our pal Obama signing away trillions of dollars in "stimulus" and "nationalized healthcare"), your money will be worth even less.

That's not seeing the small picture, that's being a careful investor rather than a follow the herd or contrarian mentality.

Largest national wireless network, iPhone ... wow, sounds like you haven't invested long enough to see a big company go bust. Ever read about Ford, GM, Chrysler? Sounds like big companies to me.

 

[iJohnHenry]

wow, sounds like you haven't invested long enough to see a big company go bust. Ever read about Ford, GM, Chrysler? Sounds like big companies to me.

Yes, companies still stuck back in the 60's.

Good luck with that.

Adapt, or die.

 

[maestrokev]

I think the time to invest is within the next 8 months.

I read the market a lot (as much as a 20 year old Engineering student can), and I have some solid picks for the ensuing years. Take my advice, or leave it.

I think if you purchased these 3 companies at the moment, you can expect some big gains in the next 5 years.

Any truthful economist will tell you that any forecast past one year is like throwing darts at a board. Have you noticed how forecasts have been revised every month since the Bear Stearns debacle? Thinking ANY company can guarantee solid returns in the next 5 years is called blind faith or gambling.

Forget about the past, you don't drive looking through the rearview mirror do you?

 

[Rodimus Prime]

Lets see, I invest in 1997 and now, 12 years later, I show no gain. If that's not good enough for you then look over at Japan. 8-9%, over the long term, sure

This buy and hold is Wall Street talk designed to keep the greater public (you) in the market while big money (them) take profits.


Here is a quiz, if you invest in a stock (or market) and it falls in value by 50%, how much does it have to perform before you recover your losses? And again if it falls in value by 75% or even 90%, how much does it have to perform before you recover your losses?

And based on your 8-9%, how long will it take you to recover those losses?

Try expanding that view a little. I read something recently that showed took everything over the past 4 or 5 presidents and it showed when Bush left office even with the huge drop in the market.

It still worked out to be 10% a year on average. Now mind you that you where pushing 30 years of time. Over 30 years it worked out to still hold a 10% average after a near 40-50% drop in 12 months.

That should tell you something.

Long term the market still holds 10% a year. You are looking at it short term and yes in a single year it can be very bad. Black tuesday in the 80%where the market dropped 22% in a single day was bad and it took 5 years to recover back where it was in the long run it still averages out to 10% a year.

I am still putting 10% of my pay check into my 401k I am not going to stop doing that since that is for the long haul and in 30 years I will avearage a 10% return on it.

Now to us young people we are going to take real adavatage of this down turn. We do not have as much to loses but we stand to gain on it being low and going up.

 

[sushi]

This buy and hold is Wall Street talk designed to keep the greater public (you) in the market while big money (them) take profits

I don't know.

Let's just say that I purchased a 1,000 shares of Microsoft when they went public for about $27 per share, and then held them for all these years through thick and thin.

I would have 512,000 shares at around $17 per share, or 8.7 million in stock value, from that one investment. All capital gains are sheltered from the capital gains tax until I sell.

That's not to say that shorting, or holding stocks for shorter periods isn't beneficial as well.

I hope that you realize that market averages and individual stocks are completely different beasts. Anyhow, never put all your eggs into one basket. Diversify your investments and monitor them.

 

[IJ Reilly]

No DZ is right. The market WILL bounce back. Now is the time to invest because long term the market still will hold it 9-10% growth a year. It will jump up quicker this time to keep on that pass.

Does this advice come with your money-back guarantee?

Most investors find that their investments are now worth less than they were ten years ago, including any additional money they invested in the markets over that period of time. Tell them how they can expect 9-10% growth a year, especially since this is the second Wall Street panic of major proportions they've experienced within the last eight years, and every penny they've invested over a ten year period is now gone, plus a whole lot more.

Your advice is a very, very tough sell for anyone over the age of about 50. Someone who might have considered themselves within striking distance of retirement is very unlikely to see even their invested equity return, let alone a return on their equity, within their lifetime.

 

[sushi]

Your advice is a very, very tough sell for anyone over the age of about 50. Someone who might have considered themselves within striking distance of retirement is very unlikely to see even their invested equity return, let alone a return on their equity, within their lifetime.

If you are nearing age 50, then you should not be 100% invested in the stock market. Your portfolio should be diversified with other investment vehicles.

Never put all your eggs in one basket.

 

[IJ Reilly]

If you are nearing age 50, then you should not be 100% invested in the stock market. Your portfolio should be diversified with other investment vehicles.

Never put all your eggs in one basket.

The consistent advice provided by investment experts is that individuals should be equity heavy until they're about ten years from planned retirement -- which for most, is into their mid-50s, and that they should be diversified. I sure was -- large cap, small cap, REITs, foreign stocks, bond funds, cash. But it made little difference. What was the hedge against this market plummet? Nothing but cash was immune.

Virtually anyone who remained invested, in even a prudent, age-adjusted, diversified portfolio, over the last ten years has lost all of their returns and all of the equity they added to their investments over that time period. They have lost ten years of their savings, or more, which means unless they get very lucky with their investments going forward, they are not going to be retiring at age 65, or maybe ever.

To make matters worse, someone now in their mid-50s who has been investing appropriately over the past decade and was planning on continuing to make age-appropriate investments from now until retirement is virtually assured to not see their equity return unless they decide to take more risk over the next ten years than they should. This is a dilemma that has body-slammed millions of people in this age group who have been doing exactly what they were told was the right way to plan for their retirement for decades. They are now screwed.

Probably most younger people don't fully appreciate just how screwed.

 

[Unspeaked]

The consistent advice provided by investment experts is that individuals should be equity heavy until they're about ten years from planned retirement -- which for most, is into their mid-50s, and that they should be diversified. I sure was -- large cap, small cap, REITs, foreign stocks, bond funds, cash. But it made little difference. What was the hedge against this market plummet? Nothing but cash was immune.

Very true.

Where exactly were people closer to retirement supposed to put their money? Yes, someone in their 50s shouldn't own only stocks, but they'd still be in the mix. And at that age, the rest of their portfolio was probably made up of very "safe" target retirement and bond funds - which have all had a 10%, 20% and even 30% hit. When a 2010 Target Retirement fund is taking a 20%+ hit, where are the safe havens?

I suppose you could have everything in CDs or Treasuries, but you'll barely beat inflation with just those - good luck actually living off them in retirement!

 

[CalPoly10]

Where do you put your money when it gets close to retirement?

In the current times, nothing is safe. Bank Accounts might not be paying enough interest to cover inflation in the coming year with the way Obama is planning to print money off the press.

 

[IJ Reilly]

As you get closer to retirement, you should be moving a larger percentage of your investment portfolio into fixed-income securities, such as government and corporate bonds, with the objective of protecting your equity not maximizing your return on investment. But in this market, even bonds got slammed. Not that this makes a whole lot of difference to people who were investing as though their retirement was still 10-15 years off. Unless we see a huge rally and very soon, a lot these people are not going to be able to afford retirement at age 65, or maybe ever.

 

[CalPoly10]

As you get closer to retirement, you should be moving a larger percentage of your investment portfolio into fixed-income securities, such as government and corporate bonds, with the objective of protecting your equity not maximizing your return on investment. But in this market, even bonds got slammed. Not that this makes a whole lot of difference to people who were investing as though their retirement was still 10-15 years off. Unless we see a huge rally and very soon, a lot these people are not going to be able to afford retirement at age 65, or maybe ever.

You're half way right (in the US atleast).

The people that are close to retirement will be able to receive Social Security. They'll have something to fall back on. It is the people that are 20, 30, and 40 years old that are screwed. They're paying into a black hole of Social Security, being taxed to death, losing jobs...

 

[IJ Reilly]

You're half way right (in the US atleast).

The people that are close to retirement will be able to receive Social Security. They'll have something to fall back on. It is the people that are 20, 30, and 40 years old that are screwed. They're paying into a black hole of Social Security, being taxed to death, losing jobs...

You have it completely backwards. Younger people still have plenty of time to save for their retirement, which is what everyone ought to be doing starting in their 20s, not assuming that Social Security will do for them what it was never intended to do. They may even have a golden investment opportunity coming up, one they can risk taking, while people in their 50s and older cannot. Also, those of us who are middle-aged know that the Social Security goalposts are already going to be moved down the field before we're old enough to collect.

 

[CalPoly10]

You have it completely backwards. Younger people still have plenty of time to save for their retirement, which is what everyone ought to be doing starting in their 20s, not assuming that Social Security will do for them what it was never intended to do. They may even have a golden investment opportunity coming up, one they can risk taking, while people in their 50s and older cannot. Also, those of us who are middle-aged know that the Social Security goalposts are already going to be moved down the field before we're old enough to collect.

The problem is that we're still paying money out of out income to a system that will not benefit us. If the money I put in to Social Security were put into a savings account, I'd be happy. But it's not. It's taken, and most likely I will never see it again.

I invest, I save, and at 20 years old, I have roughly 25-30,000 saved. I will take risks with this money once I am finished with school. While I'm still young, I plan on taking many ventures. If they fail, I have time to rebuild. If they succeed, I will live a happy life.

I see this golden opportunity in front of me, and to tell you the truth, I think I will come out of it on top of 99.9% of people. When the housing market hits bottom, I will be emerging from school with a great engineering degree and enough capital to make something happen. Buy a piece of land, and a house, and get my personal real estate profiting on the road.

 

[IJ Reilly]

I'm not going to debate Social Security. This isn't a political thread and there's no reason for it to become one. Suffice to say, Social Security is not a retirement fund or a bank account. It was never meant to be either.

But on the topic, younger people are not going to be screwed by this stock and housing market panic. They may even benefit in the long run for the reasons both you and I have mentioned. It's older people who have lost half of their planned retirement funds along with much of the equity in their homes, and don't have the years left to recover it, who are screwed. They may have planned well, but they are still screwed.

 

[Rodimus Prime]

As you get closer to retirement, you should be moving a larger percentage of your investment portfolio into fixed-income securities, such as government and corporate bonds, with the objective of protecting your equity not maximizing your return on investment. But in this market, even bonds got slammed. Not that this makes a whole lot of difference to people who were investing as though their retirement was still 10-15 years off. Unless we see a huge rally and very soon, a lot these people are not going to be able to afford retirement at age 65, or maybe ever.

true but as it been pointed out the market follows trends.

The long term growth of the market will hold true. Just sucks if you where with in 10 years of retirement. Other wise chances are you will be fine and still come out on top with the same net return of 10% a year.

 

[IJ Reilly]

true but as it been pointed out the market follows trends.

The long term growth of the market will hold true. Just sucks if you where with in 10 years of retirement. Other wise chances are you will be fine and still come out on top with the same net return of 10% a year.

But it hasn't held true. I would suggest that you look at a chart of a broad market index such as the S&P 500 over the last ten years or so, compared to history. A dollar invested in 1997 is now worth less than a dollar today. A dollar invested only a year ago is worth about fifty cents today. This is the worst performance for equities since the Great Depression, and it has gone on nearly as long -- so far.

It sucks for more than people who are ten years away from retirement. It could easily take 20 years to make up these losses, and that's assuming the market doesn't tank every 8-10 years, which it's done not once but twice during that time period. What are we to make of this trend?

Put it this way: A lot of us followed the expert's advice to buy equities throughout our most productive working years. If we followed that advice for 20-30 years, were we not totally screwed? Were the experts right or were they wrong? What makes you think the future will be any different?

 

[itcheroni]

I have a feeling we're going below 5000. If you look at the DOW priced in gold instead of dollars, the bottoms are usually when the DOW is worth just 1 ounce of gold. In 83, it was 1 ounce of gold and in 2000 it was 43 ounces. Now, in 2009, we're at about 7-8 ounces. We've got a bit to go.

Since the crash, I've actually been getting the steadiest returns I've ever had, but it's because I'm into inflation hedges. I don't see the economy improving until the next administration.

Someone mentioned the GDP at 14 trill and the unemployment only at about 8%. Whoever that is should keep in mind that the government has revised what the inflation and unemployment numbers mean. If we knew the real numbers and adjust for inflation, I think we're awfully close and will reach 1930's levels. I think a dollar today is about 3 or 4 cents in 1900. And the very composite of the GDP is suspect because it accounts consumption, which is the largest part of the GDP.

 

[Rodimus Prime]

But it hasn't held true. I would suggest that you look at a chart of a broad market index such as the S&P 500 over the last ten years or so, compared to history. A dollar invested in 1997 is now worth less than a dollar today. A dollar invested only a year ago is worth about fifty cents today. This is the worst performance for equities since the Great Depression, and it has gone on nearly as long -- so far.

It sucks for more than people who are ten years away from retirement. It could easily take 20 years to make up these losses, and that's assuming the market doesn't tank every 8-10 years, which it's done not once but twice during that time period. What are we to make of this trend?

Put it this way: A lot of us followed the expert's advice to buy equities throughout our most productive working years. If we followed that advice for 20-30 years, were we not totally screwed? Were the experts right or were they wrong? What makes you think the future will be any different?

expanded it back 20-30 years and you get by to 10% a year. Keep pushing it back to even pre great depression and guess what STILL works out to be 10% a year.

you are taking a snap shot of a picture of 1 year. It just one year it has had a huge down turn but over the long haul in 10 years time I bet it will be back on track for the 10% average over the long term.

 

[IJ Reilly]

expanded it back 20-30 years and you get by to 10% a year. Keep pushing it back to even pre great depression and guess what STILL works out to be 10% a year.

you are taking a snap shot of a picture of 1 year. It just one year it has had a huge down turn but over the long haul in 10 years time I bet it will be back on track for the 10% average over the long term.

Not necessarily, and I'm not snap-shotting one year, but looking at the last 12 years. Historically, we've experienced long periods of good returns and long periods of bad returns. We are approaching negative rates of return very close to levels experienced during the Great Depression and lasting well into the post-war era. It's a bit Pollyanna to think of this as merely a "trend" when the magnitude of the event is historical, and it's entirely possible that many millions of people will not live to see their equity return. You may be willing (and young enough) to bet that market performance will regress to the mean, but that's not something everyone can afford to do.