Sad Guys on Trading Floors

The_Tim

Sad Guys on Trading Floors
"Turning the economic crisis into one of those clever internet memes."



hat tip: Boing Boing

Markor

Whenever the Dow takes a big dive, the MSM shows a pic of some supposedly shell-shocked trader who is actually just yawning or doing a trading signal with his hand. These traders usually make more money on the big dive days, at least for their companies.

I'm also disgusted by the many recent articles like this one:

From Your Money: Keeping It Safe:

The country may need some time to work through the detritus of the housing bubble and lending excesses. And stock returns could very well be anemic as that happens. But history shows that some of the best long-term gains go to investors willing to buy stocks when they're reviled, as in the years following major setbacks like the 1929 crash and the 1973-1974 bear market.

Of course, the long view may not seem particularly relevant to you at the moment. But remember: the money that you contribute to accounts such as a 401(k) is going to be invested for many years.

The real question isn't whether you should be contributing to a 401(k). It's how you should be investing the money you contribute, as well as the money that's already there.

If you're in your 20's or 30s, you still want most of your 401(k) money in stocks, say between 80% and 90%. ...

What they don't tell you is that from the beginning of 1930 to the end of 1932, the Dow fell another 75%. And from the beginning of 1975 to April 1982, stocks gained less than 1% annually on average.

Even as the super-rich have been getting out of stocks and into cash, the mass move to cash is killing their companies. It's no surprise then why the MSM keeps telling everyone to stay the course in their 401Ks.

The stock market is unpredictable in the short term. The only reason people invest in it is because it's predictable in the long term. Right now the 2-year forecast is down, not up. If "stock returns could very well be anemic" while the country works "through the detritus of the housing bubble and lending excesses", then why stay in stocks?

rose-colored-coolaid

Markor wrote:

Even as the super-rich have been getting out of stocks and into cash, the mass move to cash is killing their companies. It's no surprise then why the MSM keeps telling everyone to stay the course in their 401Ks.

I think it depends a lot on your horizon. Mine is decades out, so I will benefit from dollar-cost averaging by "staying the course". If your are in your 50s however, now is a good time to be safe, rather than staying the course.

Markor

If you think the stock market will be flat or down in the next two years or so, putting new money in CDs (for now) beats dollar-cost averaging.

Pndscm

Averaging down = throwing away good money

Check Denninger's 20/50 SMA cross tool for a good guide on when to be long or in cash.