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Links to interesting articles I have read over the past few days that you might also enjoy…
John Mauldin: Are We There Yet?
Maywood: A city that sacked its entire staff (and its citizens think services are now better)
The Forgotten Depression of 1920
The Advent of the Cynical Bubble
Three Graphs About China and Cars
How facts backfire: Researchers discover a surprising threat to democracy – our brains
McKinsey Study Confirms Sellside Analysts Are Conflicted, Slow, Biased And Generally Stupid
“When Money Dies: The Nightmare of the Weimar Hyper-Inflation”, by Adam Fergusson (pdf)
August 2, 2010 at 9:05 pm
Petra, thnx for reading list. I stopped at the first one.
I like Montier´s views. I like to discuss implications. Based on those views he perhaps went out of equities quite early in 2002 I guess, so he missed the rally. And, of course, he missed the bust. Others also predicted in 1999 that one can not expect much of equities in the next 10 years. But, they did not go out of equities, so they did not miss the rally. And they did not miss the bust, either. I guess, those two directions of thought produced similar results despite truly different attitudes. Either you get out when valuations appear too high, or, you get out partially, or … you do not get out – full stop.
And, It appears, that Montier´s approach has got a one downside. And it is the downside of being almost fully in cash/bonds when market is high (in bubble stage). And, at that time, you are at mercy of government. I am not very enthusiastic about being at mercy of government. Therefore, I believe that investor should own SOME stocks even through the bubble and bust, being mentally prepared that they might go down any time.
I am leaving a link to an old article which I believe can help simply relax for a while. Enjoy atmosphere of old times, when speculators were buying bonds, stocks, and when they did not know what to do, they just stayed in cash. http://www.jasonzweig.com/grahamspeech.html
Nice day, G.
August 6, 2010 at 2:34 am
Thanks for your comments. The thing is, you’re always at the mercy of the government – now more than ever. Political risk & regulatory changes and interventions have huge implications for the economy and markets today. On a more general note, I’m not a big fan of the long term buy and hold idea – at least not in secular bear markets (as we’ve had since 2000). It works fine in a secular bull, but in a secular bear (with several cyclical bull & bear markets) market timing or, for more hands-off investors, staying out of stocks may be best.
Here’s a handy chart to visualize secular trends since 1870 – note by historic standards the current bear market should have another 6-8 years to run.
http://www.ritholtz.com/blog/2010/07/4-secular-bear-markets/