Letters to the Editor
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If that's true...
Alan Greenspan is a stone-cold killer. He murdered global free-market capitalism!
...then maybe he's a good guy after all.
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Andrew....
Alan Greenspan is a stone cold killer! That's brilliant!
Of course, he was orchestrating stock policies and easy homeownership because I think he knew that "ownership" of things usually encouraged people to vote republican. When economic times are good, people usually think with their pocket book and vote for the guy who's going to lower taxes. I can't believe that this wasn't part of greenspan's monetary calculations.
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It is worse than it looks
The Standard & Poor's 500-stock index, the basis for about half of the $1 trillion invested in U.S. index funds, finished at 1352.99 on Tuesday, below the 1362.80 it hit in April 1999.
This only looks like a lack of progress. In fact, it's a considerable decline because the dollar has lost a lot of value since 1999.
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The Age of Turbulence
Alan Greenspan is a really smart guy. If Bush had listened to him, things would be fine.
As for Bear, isn't Bernanke the fed chairman now?
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The problem isn't capitalism...
...or socialism, or republicanism, or any other ism. The problem is human nature. There has never been a social or economic system that can withstand the greed and stupidity of its participants.
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It's actually not all that bad
Just looking at the S&P 500 close since 1999 ignores the effects of Dividends. So it's both worse (i.e. decline of the dollar) and not as bad as it looks. I think it's foolish to look at the performance of the stock market or even the economy over an arbitrary length of time. There will be volatility. There will be things that we do right, and plenty of things that we do wrong. Instead driving ahead with our sights set on the rear view mirror we should be looking ahead, but knowing what bumps we hit.
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So we're right where we were before the LAST bubble burst
1999-2000 was the high water mark of the dotcom bubble. I wouldn't lose any sleep over it unless you happened to be one of those suckaz who invested in them.
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stock market is very long term
It took from 1930 until 1955 for the market to get back to its price before the crash (using the Dow as the indicator). BUT the market also did nothing from 1965 until 1980. Between 1980 and 2000 it went steady upward. In the 80 years or so since the 1929 crash the market has trended up only a total of 32 years, if you define trend as reaching new highs yoy.
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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.
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18 years and Greenspan
The supposed economic boom attributed to Ronald Reagoon is all smoke and mirrors. Reagoon convinced American that debt is prosperity and government debt and personal debt have fueled capitalism since the 1980's. It wasn't the capital markets it is the debt market that created the delusion of prosperity created by capitalism. The CORPORATE WELFARE KINGS received the debt proceeds from the governments deficit spending and others, the individual American taxpayers are paying the principal and interest for the loan proceeds given to the CORPORATE WELFARE KINGS who didn't hesitate to claim their own genius by giving themselves huge salaries and bonuses earned off of the loan proceeds for which the principal and interest ARE paid back by the American taxpayers, a sweet deal indeed for THE CORPORATE WELFARE KINGS who howl and whine whenever the government just threatens to reduce their CORPORATE WELFARE BENEFITS.
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Social Security
I asked that very question on my blog in early March.
http://thefirstannualkrogblog.blogspot.com/2008/03/that-wouldve-worked-out-well.html
Without going into extensive depth...it doesn't seem like it would've been too good.
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broohaha
Obviously y'all don't actually know anything about Greenspan beyond hearsay.
You know what they say about hearsay? It doesn't count in a court of law.
So if you're going to make your case, try including a verifiable fact or two.
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Greenspan's performance doesn't seem as bad as you say.
In fact, it doesn't seem bad at all.
Here is a chart of the S&P 500 over history:
http://finance.yahoo.com/q/bc?s=%5EGSPC&t=my
And look at that on a linear scale:
http://finance.yahoo.com/q/bc?s=%5EGSPC&t=my&l=off&z=m&q=l&c=
If I connect a line from 1987 when Greenspan took office, to 2005, or to now, the upward path seems pretty clear.
Market performance from 1995-2000 was literally unprecedented, and it warps decade to decade statistics.
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One thing you forgot, Andrew
At the end of your article, is that consumer confidence is being measured at record lows. That is also a harbinger of very bad things to come.
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Does anyone actually look at long term charts?
If you look at stock market behaviour from the late 19th century up until today, this sort of flat trading is normal. When I was taking an investment course recently, the first thing the instructor pulled out was a chart - I can't remember which index - of the last 134 years. During 100 of those years, the market was bouncing up and down within a range, this period of "flat" trading usually lasted 20-30 years, and was followed by rapid upward movement. The longest upward trend was the one that ended with the dot-com bust, so it would make sense to expect another 10-20 years of flat trading now.
The lesson? Just buying into indexes is not a good investment. You actually have to pick companies that are going to outperform the market. And don't hang on through the downturns...preserve your capital or sell short, and buy back in when things start to turn for the better.