Also, he has a great Mea Culpa on why he missed this, and a discussion that fits right into my theme about how many missed this meltdown, and advice for those of us who did and might think too much of ourselves:
I should mention first that the few people who did see it coming were not necessarily any wiser than anyone else. Some of them had predicted nine of the last five recessions. A stopped clock is right twice a day. Even those who claim to have foreseen this mess couldn't make the case well enough to alarm very many other people. And if you want to know if they were really wise or just selling a different story because the market was less crowded on the pessimistic side, you'd have to look at their bank accounts. Did they put their money where their mouth was?
Wall Street and economics are littered with the figurative corpses of those who got a big call right and got lots of attention and then became a joke as their prescience proved to be just luck.
Megan McCardle gives a touching and heartfelt explanation of why opportunity cost has to be considered in regards to GM in "Save the Rustbelt."
Speaking of Megan, she has inspired a true decining institution to ask for a bailout:
But Megan McArdle at The Atlantic came up with a compelling argument:
“The news business is special. Without us, you wouldn't know anything. Besides, it provides millions of low-paying, insecure jobs to overeducated yuppies who are going to move back home, into your basement, if you don't do something, quick.
“And the news business is the other industry that can, all by itself, send the real economy into a tailspin. You think you're worried about a depression now? We could make you really depressed. I'm not threatening, or anything; I'm just saying, it's a nice country you've got here. It would be a real shame if someone convinced consumers to stop buying Blu-Ray players and shift their savings into canned guns and ammunition.”
Meanwhile Hormel is betting that the present economic situation is a bullish sign for Spam! Fascinating stuff really, as Spam has a number of devotee's. My wife spent time in Hawaii this summer studying Pearl Harbor, and came back and marveled at the many uses Spam is put to there, including in faux Sushi.
stocks have never lost money over a 20 year period.
It is certainly the best buying opportunity since at least the early nineties, though I think there is a good chance the opportunity will get better.
I definitely do not think stocks will lose money over the next twenty years, though in inflation adjusted terms I expect from March of 2000 to March of 2020 to be a pretty close race for the S&P500. Returns for that period are likely to be miserable. I don’t expect the NASDAQ to go above its high until 2035 or thereabouts, and in inflation adjusted terms a decade or so after that.
This market is not comparable to 1966, though a year ago it certainly was, but if you had put a thousand dollars in the S&P 500 in that year the index didn’t permanently exceed its high of that year until 1982!
Not what I would call a big move for a 16 year period. Adjusted for inflation you didn’t make your first dollar until the early 1990’s.
So, while I do think long term returns are more compelling now than in a very long time, investments in overvalued markets can have miserable returns for decades. Luckily that is not the case now.
The New Republic has a good concise article explaining how this crisis is a result of global macro imbalances caused by the choice of the US to have a large current accounts deficit financed by foreign governments. I believe the author is right that we need a "new Bretton Woods," but I also think the implications of the crisis is that this crisis is going to be global and very difficult. There probably isn’t any other way to "fix" the global economy but through a painful process. Let’s just hope that it doesn’t lead to political unrest, as these difficult economic times often do. http://scotterb.wordpress.com