Jeff Saut recently quoted a WSJ article:

Memo to investors: This is what you get paid for.

Volatility. Stomach-churning drops. Watching your paper wealth evaporate.

Stock market profits aren’t free.

Garbage collectors (at least, in non-union towns) know they have to turn up in the morning and pick up people’s trash in order to get paid. Piano teachers know they have to teach piano to pay the rent. Shop keepers have to tend to a shop.

Only investors in the stock market expect to be like the lilies of the field. They toil not, neither do they spin. Could Wall Street just send us the checks every month please?

The reality is that investors have to earn their money, through
brains and nerves. The brains can mean doing smart things – like buying
Apple when it started to turn around. More often they simply not doing
dumb things, like buying Pets.com.

The nerves mean not panicking or getting swayed by fear, at the bottom, or greed, at the top.

I cannot disagree with the concepts expressed here — investing ain’t easy, and once it gets shaky, markets separate the Men from the Boys.

There is much to be said for recognizing the myriad difficulties associated with deploying cash, managing risk, allocating assets and preserving capital.      

However, I am rather uncomfortable with that title: Why It’s a Great Time to Be an Investor.

Why?

‘Cause it reminds me way too much of the NAR campaign It’s a great time to buy or sell a home!

That was from 2006 — how do did THAT work out?

>

Previously:
It’s a great time to buy or sell a home! (November 2006) 
http://bigpicture.typepad.com/comments/2006/11/its_a_great_tim.html

Analyzing why "It’s a great time to buy or sell a home!" (November 2006)   
http://bigpicture.typepad.com/comments/2006/11/analyzing_why_i.html

>

Source:
Why It’s a Great Time to Be an Investor
BRETT ARENDS    
WSJ, July 2, 2008 10:38 a.m.
http://online.wsj.com/article/SB121500722208222939.html

~~~

Category: Apprenticed Investor, Investing, Markets, Psychology, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

32 Responses to “It’s a Great Time to Be an Investor !

  1. rob says:

    Yeah but the housing thing you could only play long …

  2. Marcus Aurelius says:

    I have several friends who, for the past 25 years or so, have jumped from industry to industry (depending on what was hot at the time). There was never any basic understanding of the fundamentals of each industry – just the knowledge that that’s where the money was being made at the time (always had good bonus and/or commission structures).

    Their paths went something like this:

    CRE to mortgages to IT/tech/telecom to builders to mortgages (again), and finally, several of them are seeking employment in the defense/recruitment arena.

    A lot (but not all) of this job/industry shift phenomenon was party boys (lots of alcohol and cocaine) taking their homies along for the next ride. Grass roost cronyism.

    Underneath it all was the assumption that there was no need to try hard, to understand the market, or to commit to the long term. There was a palpable sense of entitlement. Why should one exert one’s self when one could be very comfortable partying and playing golf?

    It’s strange that they don’t see a cause/effect correlation between their shallow, unrealistic grasp of business and the regular and repeated demise of their “chosen” industries.

    They don’t recognize, and are befuddled by the current business landscape. They don’t know how to work – much less how to work smart.

    These guys are (expensive) dead wood. A level playing field will be a refreshing change and the opportunity of a lifetime.

  3. VennData says:

    Time to sell everything. From the Financial Times…

    “Go to Great Lengths”

    The Maxi dress is back. Hemlines have dropped to the floor.

  4. BG says:

    Yes, it could be a great time to be an investor. The problem is there is so much disinformation out there. What do you believe and what do you ignore?

    With the complexity of our problems today and the degree of effort applied to mislead all except those who happen to be very close to the topic, how does an investor win in this kind of environment?

  5. Greg0658 says:

    :-)
    “how do did THAT work out?”

    say that 10 times fast

  6. franz says:

    Actually, it sucks to be an investor at this time. An investor’s approach implies a long term view. At the current time, the market is only rewarding short term traders. The market moves is painfull for a long term investor. I don’t know how many investors are feeling well after 20% drops.

  7. IBH says:

    You should try and capture a great interview on BBRG radio last week where Louise Yamada was the guest for the hour.

    Her comparison is that this bear market resembles the 1929 bear market that lasted till WWII, almost 14 or so years. There were some magnificent rallies and some mind-blowing declines. Her best analysis puts us now around 1935-1937 (if i heard right). The bear market started in 2000 with the COMP drop from 5000 to 1100.

  8. Brian says:

    How About:

    “It’s a great time to be a daytrader”.
    Friday was great.

  9. tyoung says:

    Wasn’t this title meant to be ironic unlike the NAR’s campaign?
    I read his whole article as an apology for having made a call for a short term bounce which didn’t/has not yet arrived.
    http://www.raymondjames.com/inv_strat.htm

  10. Howard says:

    I have handled other people’s investments and speculations for around 20 years and I have almost NEVER been caught in a market that moved against me, other than having both ends of a spread go the wrong way. There is nothing more sickening than limit moves against you for a couple of days, but if you play commodities that will happen once in a while. So I’d like to know what kinds of devices other people use so as not to get caught in an Enron, a stock that gave sell signals for weeks before the collapse. I use Wm. O’Niel’s sell indicators and I’ve been saved fifty to a hundred times. In commodities, when I do them, I play futures and I use the Market Profile, which may not bail you out of sudden collapse. Anyway, every time I read about people being wiped out I wonder. So what do you use, Barry?

  11. With the drops around the world, I think China is a much better place to put money than the US. For the US to be really cheap, with the growth expected over the next ten years the p/e would have to come down. S&P 500 p/e is around 15 now, 1974 it got as low as p/e 7. Now that is cheap! We probably will never see it that cheap again.

  12. Bruce says:

    It will become more interesting here….

    The FDIC has in the last 15 years taken over 127 banks with combined assets of 22 billion…

    Indymac had assets of 32 billion….

    http://money.cnn.com/2008/07/12/news/companies/indymac_fdic/index.htm?source=yahoo_quote

    Bruce in Tennessee

  13. Jim Haygood says:

    “I am rather uncomfortable with that title: Why It’s a Great Time to Be an Investor. Why? ‘Cause it reminds me way too much of the NAR campaign It’s a great time to buy or sell a home!”

    Ditto, Barry. Any industry whose sales force claims that “NOW is always the time to buy” is by definition unprofessional.

    At a local nonprofit on whose board I serve, we were faced in May 2007 with the problem of investing a bequest. The national organization gave us a big dose of the Wall Street dogma: just kick it into a 60% stocks / 40% bonds balanced fund, and collect your long-term inflation-plus-5% return.

    I took a strenuous stand against this nonsense, arguing that one CANNOT just ignore valuation and buy into Bubbled, low-yield, low-prospective-return markets. By digging in my heels, I was at least able to negotiate a dollar cost averaging deal, in which we would make four annual installments into the balanced fund. So as the market crumbles, 75% of the bequest is still locked into structured maturity zero-coupon Treasurys, yielding 4.8%.

    Anybody who goads you (as the Realtors have done for decades) to “buy now, before prices go up” is a fool and liar. Wall Street has an army of clowns and shills, whom you can see on a certain teevee network, that never deviate from this braindead, self-serving message.

  14. BobC says:

    Howard,

    I would be willing to bet that while your looking for indicators that help you not get walloped has served you well, that it is the act of looking that is more important than the indicators you choose. It is this difference in perspective that separates investors from speculators. Penny stocks exist because there are enough people hoping to double and triple their money in a single day that they are willing to take the risk of loosing most if it. Preservation of assets is as important as expanding them.

    Speaking of investing, what do people here think about railroads? My suspicion is there is going to be a fundamental, permanent shift in the shipping industry that will ultimately combine the strengths of both trucking and railroads. Cheap fuel made it easy to spurn the economies of scale of rail transport. I think there is going to be a short term rush to railroad stocks followed by a long transition to a hybrid shipping model. A big question for me is if the current rail infrastructure will need significant upgrades. Long term, industries that support this infrastructure upgrade might be a could conservative investment.

    Disclosure – I currently have no stake in any railroad related investments. This is just some musing about what might be good to look at. I am currently in cash and gold because everything is such a mess I can’t make heads of tails of it. Yeah, I know, cash doesn’t beat inflation, but it isn’t going backwards as fast as equities.

  15. se says:

    Actually it is a great time to be an investor!!! Invest in gold and commodities, short the whole market and you will be fine. Worked for me. Do not diversify, do not hold to a loosing bet, do not listen to the idiots in the government and wall street. There’s agenda does not include you and me. Happy trading. GLD QID SKF SDS DXD

  16. DavidB says:

    What do you believe and what do you ignore?

    Believe the group that has the greatest power combined with the greatest influence. Find and follow those and what they are doing and you should do well

  17. Alisa says:

    I think it is a great time to be an investor. No doubt there are strong, stable, and profitable businesses out there that have yet to be fully recognized for their current and future earning power.

    The problem is… I am still learning how to recognize them!

    I recently started My Investment Journey into the land of stocks, bonds, the bears and the bulls, and in a land of mergers, acquisitions, and corporate take overs.

    Nevertheless, I do believe it is a great time to be an investor.

    http://ourstockmarketjourney.blogspot.com/

    Be well!

  18. Winston Munn says:

    It’s hard not to be a confident investor with the leadership this far “ahead of the curve”:

    “Sunday July 13, 12:13 pm ET
    By Jeannine Aversa, AP Economics Writer

    WASHINGTON (AP) –
    Chairman Ben Bernanke and his central bank colleagues were expected to approve a plan Monday that would crack down on dubious lending practices that have hurt many of the riskiest “subprime” borrowers — people with tarnished credit histories or low incomes.”

    Would the last one out please close the barn door?

  19. Wallsteet Pigmen says:

    “markets separate the Men from the Boyz”

    That’s the most stupidest thing I’ve ever heard in my life!

    Try this instead, dumazz:

    “Cronyism separate the Boyz from the Men”

  20. larster says:

    Agree w/Franz that it is a great time to be a trader. This is a time where Lynch’s advice to wait for the first 10%up move before jumping in a stock. You’ll still make a excellent return, if you give up the first 10% and the last 10% and you will miss the sickening drops that this market is giving investors on a daily basis.

  21. DL says:

    When the S&P is at 1100 in August of 2009, Jeff Saut will love the market even more.

  22. BG says:

    While the masses don’t think like this, investors should be happier at the margin when prices are down and understand that it is a worse investment environment when stocks go up. The cheaper the merchandise, the better, if you are a buyer/saver. The problem is people need to differentiate between extremely leveraged financials and companies with unconservative balance sheets in undeniably hard times. Buying and holding indexes in a secular bear market is crazy.

    The point here is that investors who know what they are doing and buy cheap companies with no leverage and sustainable competitive advantages are still going to do well if you measure performance in years and not minutes. Sure P/Es could go from 14 to 8, but if you’re buying the companies trading at under 10x now that can grow earnings at decent compounded rates from here, you’re going to be alright. I think that is what Saut is talking about in his piece – now is not the time to lose your nerve but to find great long-term opportunities.

  23. Bodz says:

    “It’s a great time to buy or sell a home!”

    Actually, the NAR was half right. It turns out that 2006 was a great time to sell your home.
    Perhaps today’s title should have been “Why it’s an exciting time to be an investor”
    If you are invested in bonds or CD’s and have now started to dollar cost average into the stock market like me, it is fun.

  24. wmac says:

    “Garbage collectors (at least, in non-union towns) know they have to turn up in the morning and…”

    I can’t believe anybody would pay any attention whatsoever to a person who would write a line like that. What an ignorant cheap assed shot at those of us lucky enough to have Union representation. Yeah, I sit around home all day watching soaps and they mail me my check.

    …rant over…

  25. Steve says:

    It’s a terrific time to stress test a trading system. How about that for a silver lining ;>)

    Since Jan 1, I’ve been running a “live test” of my trading system. Prior to the October market top, the CAGR was over 25%, Maximum drawdown less than 10%. The system has done a pretty good job of adapting during the market down-trend.

    The purpose of the live test is to demonstrate that an amateur investor can use professional methods to achieve extraordinary results.

    allstarstockmodel.blogspot.com

    All those hedge funds that were charging alpha fees for beta performance are now being undressed.

  26. me says:

    The completely unnecessary jab at union labor pretty much killed whatever point Saut was trying to make. Tacky.

  27. catman says:

    I have a trading system that I’ve tested almost every day for the last 50 years. My brain.

  28. Bruce says:

    One other thing occurs to me, and maybe it doesn’t make much difference…but back in the time of Arthur Burns/ Paul Volcker our inflation and fear of the future seemed to me to be an internal U.S. problem, our policies caused the inflation (with some outside help) and our policies stopped it.

    This time we are more like a third world nation, i.e. petroleum and commodities caused a major portion of the problem, and this wasn’t necessarily internally generated…now we seem to be responding to this present crisis in a manner very unVolckerianlike and this is, at least to me, very concerning….it seems beyond the power of the strongest country in the world to resolve this problem…

    I have more of an idea how Russia and Thailand and Argentina felt…and I very much would choose another path here than what BB has chosen…(and our other economic leaders…)

    Bruce in Tennessee

  29. Frank says:

    Apparently Mr. Saut never worked much for a living. People who do manual labor arn’t stupid or slaves, if a person bust’s their ass for thirty five years paying taxes to the theiving government,they deserve better than having their s.s. stolen as well. Do you want us to all live on the generosity of our masters? My union will remove you from the job if your not doing it,realizing we negotiate as a whole to try and better each others lives. Back when the country was 40% union and growing,there were one parent working families, less drugs, and even a few honest bankers

  30. bendover0 says:

    uly 13 (Bloomberg) — Treasury Secretary Henry Paulson sought authority from Congress to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac, aiming to stem the collapse of confidence in the largest sources of U.S. mortgage financing.
    FUTURES UP HUUUUUUUUUUUGE!!

    Fascinating: will the market rally or crash more?

    http://barrons.com/markets/US?story.index.htm

  31. david foster says:

    BobC..railroads…I’m a RR investor, having bought mostly in the early 2000s and sold about half the positions in the last year or so. I think freight rail has a great future; however, there are some issues to be concerned about:
    1)Shippers are angry about rates, and may have the political pull to get some form of re-regulation imposed. (Picture the CEOs of Dupont and ADM singing old Granger songs about the inequity of the railroads.)
    2)The are indeed a lot of capacity constraints emerging, and it’s become very difficult to build anything at all in this country. OTOH, some capacity improvements on existing lines will be achievable via better train control systems.
    3)It’s no longer an undiscovered industry, so probably less room for profit than there once was.