Sunday, January 24, 2010

Dumb Americans

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:

  1. Anonymous4:33 PM

    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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