Yes, yes, I know you "need" your 401k values to go up.
I know you "need" stocks to go up in order for you to retire.
I know you "need" these things.
What you NEED first though BEFORE stock prices go up are dividends that give your stock a REASON to go up in value. Seriously? Does anybody ask the question;
"What gives a stock value?"
Or do we just blindly and ignorantly invest in indexed funds via our IRA plans?
I love the little blip up in the dividend yield in 2008 with the stock market crash, only to dive below 2% once again with this recent 50% rally in stock prices.
THE STOCK MARKET IS A BUBBLE PEOPLE. WAKE UP!
1 comment:
Cap, I'm with you on this.
My argument is if you look at corporations that actually are making profits, it's not because they're pulling in more revenue - it's because they have cut costs - e.g layoffs or offshoring or whatever.
The F50 company I work for has had nearly flat revenues for the last 10 years, yet the stock is flying high. They've done it by moving everything offshore as quickly as possible - increasing their margins.
So, yes, I think the market in general is artificially high, largely because so many investors are chucking $$ into their 401Ks and because of profits based on cost cutting - it's not because there is a general trend of growth - yet.
That isn't to say there aren't opportunities there - it's a stock picker's market now, but choose carefully.
The questions I have for the commenters here (and the good Capt) are:
1) How much is the market overvalued? 10%? 20%, 40%?
2) What do you do about it?
3) How do you know when to move back into stock funds?
And yes, I should take your investing classes
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