Letters to the Editor
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partial view
The WSJ article (and Andrew's) do not take into account foreign stocks. Sound investment methodology (the kind promoted by Ben Siegel for instance) stipulates that one's portfolio should have about 20% exposure to broad foreign stock indices. If you stick to that and rebalance periodically, you not only capture any significant appreciation in foreign stocks, but you also absorb currency fluctuations over time. If you factor that in, and you focus on more systematic market gauges than the S&P (which is a glorified Dow Jones Index - ie it is put together somewhat arbitrarily) the last 10 years don't look nearly as bad as you may think.
Now, to a certain extent, it is not such a bad thing that the public (and informed commentators) believe that stocks are terrible. It preserves them from their foolish selves (Buffett once remarked that stocks are the only things that people buy as they're getting more expensive - I'd add real estate to that).
But if you read a little further and get into the scholarly literature, it becomes obvious that over time (and we're talking 40, 50 years), there's no better asset class. Oh, and that 95% of your returns are determined by asset allocation (hence the somewhat deceptive use of the S&P500 index).
So yes, a mortgage allows people to build equity at a discount (and that's why most people's saving are overwhelmingly concentrated in their homes) - but on the other hand you pay for that equity discount by the very illiquidity of the asset (you can't sell your home fast, and usually not in a price-efficient manner, and then there are equity destroying temptations such as ARMs, HELOCs, etc etc). Hence the wisdom of diversifying one's savings.