Posts Made By: Paul Kammueller

I decided to run the numbers and see what would happen if one started investing $1200 a year into the DJIA in January 1929 and invested the same amount every year.

Of course it's a thought experiment since in those days you couldn't 'buy' the DJIA at $1200 a year. But now, with index funds, ETFs, etc. it's possible.

Interesting results:
1) by the market's bottom in 1932, you would feel like a fool: you would have invested close to $5000 and have no more than $2400 to show for it.

2) keeping up through the market's turn, one is soon vindicated: by 1936 you are ahead of your total inputs, and ahead of where you would have been investing in treasuries. After a vicious bear market in 1937-38, you're back above the line in 1939... even though the DJIA itself is still about half the level it was when you started.

So how do you cope with the 'new norm' of 5% daily swings in the market?

Which might describe you? - i.e., say I've:
1) Gotten used to gaining/losing 2 months' salary on any given day;
2) Tried to put it out of my mind
3) Cashed out so I don't have to think about it
4) Started drinking so I can't think about it
5) ???

Growing faster than ever:

----------------------------------------------------------------------------------------------------------
Percent change at seasonally adjusted annual rates ---- M1 ------------ M2
----------------------------------------------------------------------------------------------------------
Thirteen weeks ending November 24, 2008
from thirteen weeks ending:
Aug. 25, 2008 (13 weeks previous) --------------------- 22.6 ---------- 9.2
May 26, 2008 (26 weeks previous) --------------------- 14.8 ---------- 5.6
Nov. 26, 2007 (52 weeks previous) ---------------------- 7.7 ---------- 6.8
----------------------------------------------------------------------------------------------------------

http://www.federalreserve.gov/releases/h6/Current/

I've actually started to invest again in a retirement plan at work. The last several years the priority has been on debt reduction, but now with prime at 4% and the stock market 14 months into a bear move, the investment side of things is starting to look more compelling than the debt reduction side.

I'll admit it: monetary policy works on me. While a lot of people steer towards lots of debt, or none of it, my attitude towards debt is very counter-cyclical. When times are good, interest rates are high and everyone is running up their debts, I'm paying mine down. When money is cheap (and the economy's in a rut) I tend to invest more and reduce debt less.

Both investment/savings and debt reduction are personal capital expenditures, things you do to increase your net worth. How do you balance these over time? Are you all one or the other? Do you maintain some constant balance between investing and debt load, or does it partly depend on cycles? I'm just curious about others' behavior.

or something? No religion posts in over a week, what gives?

Interestingly, while the S&P500 is revisiting its November lows, the Nasdaq is still 15% above its. Interestingly, while as a sector it doesn't get any financial press anymore, tech is quietly outperforming the market at large.

Of course, the gold mining index is also, though this group has now doubled in just 4 months.

Financials remain the weakest group by far, smashing to all-new lows the last several days. The BKX as an index has lost 84% of its value over the last 24 months.

Trying to peg one month's price movement entirely to one act in Washington when there's been nothing but a flood of bad economic news is stupid in the extreme. This sort of kindergarten analysis ignores the unfolding economic reality that has been consistently bad in excess of expectations.

The fact that the market is only off 10% or so since inauguration, with the tide of hideous economic news that's been coming out through the whole period, is pretty darn good. Almost miraculous, under the present circumstances.

Market skepticism of what is expected to be a bullish policy move is actually bullish when the market is in a bear phase. A fast hard rally would have been a very bearish development, an indication that things are nowhere near bottom yet. If the market is being highly skeptical of big policy announcements, that's an indication that pessimism is just about maxed out - a bullish development from a contrarian point of view.

There are commentators who will wish to attribute every upward wiggle in the markets to something brilliant someone of their favorite party did, and every downward wiggle to a new nasal polyp on a member of the opposing party's nose or something. These people know nothing of markets.

I find it hilarious how many are piling on eager to declare this administration a failure when we're, what, 4 weeks in now? ROTFLMAO! How much did we know of the Bush administration's economic success by February 2001? 8O 8O 8O 8O When this term ends we'll mark where the market indices are, and look at the start & end points for the previous 8 years, and then let's compare notes.

I was browsing the mutual fund stats on ici.org and sat down with a calculator and got... um... an interesting result.

Ratio of balances in stock funds to total mutual funds:

Peak (2000): 58.9%
Trough (2002): 38.6%
Peak (2007): 56.9%
December 2008: 38.5%

The implication here is that average Joe mutual fund investor is now mostly 'out of the market', as he was at the last major bear market bottom around September 2002.

And no, it isn't merely due to the devaluation of the funds themselves -- the trends show real cash flow fleeing the stock funds in record amounts in 2008 (in fact many times more than in 2002, the last major outflow year).

How bad will it get?

Well, if the political right on this forum are turning to Kremlin thinkers for their modern economic wisdom, I'd say it's gotten pretty bad, for one political party at least!

After witnessing the last 18-24 months I don't think I'll ever look at an individual company stock again. 8O 8O 8O

In a world where big blue-chip names like Citibank, BankofAmerica, GE, GM and many more lose 90-99% of their value in a few years (or months), the notion of risk takes on a whole new meaning. Especially if you buy their stock when the company is doing well the news is good and the stock is $70, just before the story falls apart and the stock goes to $1.50.

Indexes for me. 8)