posted on August 4, 2001 05:46:39 AM new
I think when you get right down to it the way people value stocks has little to do with the long range potential or chances of income from the company.
So yes - potential for confidence failure and crashing prices.
posted on August 4, 2001 07:37:22 AM new
I was at a barbecue the other day and there were a group of women discussing the stock market.
They were talking about their jobs, (none of them earn more than $25k a year) and how they live from check to check because there's nothing left at the end of the month to save. They have no pensions or 401k benefits so what do they care about a crash.
They seemed to be salivating at the thought of a major crash. I guess it didn't occur to them that if there's a major crash, they could be unemployed.
posted on August 4, 2001 09:09:03 AM new
I think it would drastically shift the debate about putting some Social Security taxes into equity funds.
It would also be interesting to see how our current society would handle a depression. I doubt there would be anyone silently watching their children starve to death as happened in the last one.
I also read somewhere an analyst making comparisons between the rise of the auotmobile age ushering in the depression, and now the techno/info age ushering in the next.
posted on August 4, 2001 09:18:52 AM new
As someone with zero experience with the stock market, I have a very hard time with the proposal of privatizing even one cintilla of SS.
I view brokers as commission hounds who are only looking out for their high dollar clients and their own pockets. The beginning investor with very little means with which to invest, I would think, would have a hard time finding a good broker to take them on because there's so little in it for the broker.
On the other hand, if a large chunk of SS was privatized, I picture brokers having a field day gambling with the money of nameless, faceless people and hiding behind safeharbor statements if the money is lost. Past performance is not indicative of future results.... and all that jazz.
I don't know too many people who earn a high salary at their job. These people are in their 30s and already depending on SS because their salary doesn't afford them the luxury of saving and/or investing AND their employers offer them nothing in the way of retirement benefits.
Of course, the lack of privatization is what might break SS but that's a hard sell to folks with little or no means.
posted on August 4, 2001 10:37:35 AM new
As someone who's been in the market since his mid twenties, I see the current situation as a natural end to the Roaring 90's....
Much of the speculative money (some of mine included) went to fund the dotcom explosion and subsequent implosion but this is how the free marketplace in a capitalistic society works.
I work predominantly in the blue-collar world (being a machine shop owner) and most of my business collegues have 401K's or SEP-IRA's set up for their employees with some also offering profit sharing or matching contributions. It's up to the employee to decide how to invest that money...
Right now, with the economy slowing in many segments, the inflows and subsequent investment of retirement and other assets has also slowed, leaving less money to chase more stocks, which also have seen some degradation in confidence by investors. Hence the market downturn. IME, the market tends to predict the economy 6 to 8 months out so I would suggest a prudent approach to the holidays this year as we will likely be seeing a continuation in the flow of pink slips, especially in the tech-related and telecommunications sectors....
How to invest? Currently, I'm cherry-picking....where an industry I believe has been unfairly pooh-poohed by investors exists, I choose companies whose track record indicates good management and profiability and make an investment, diversifying between different sectors of the market (since most have been hammered quite well lately).
FWIW, anyone can educate themselves about financial instruments and investing....even my mother, who will be 80 this year, has become quite an investor (started in her late 60's) and often gives me tips on new prospects (because she has the time to do research )
I would suggest, for new investors, to think of these market downturns as opportunities to make conservative investments in quality companies, maybe limiting their exposure to stocks to 30% of their portfolio....
Remember, over the long haul, stocks tend to return around 10% ROI, so don't expect too much....and think of that money as not being part of your estate, lest you think you have joined the lifestyles of the rich and famouse when the market does well........that's what's biting people in the butt right now....lifestyle adjustments...
posted on August 4, 2001 03:59:36 PM new
We are in the unusual position of having people with whom we socialize from a broad spectrum economically.
We know couples who live off a single wage earner making 35/40k and we know a couple who each had a business before marrying and limit their income to $375k/yr plowing the rest back into the business. We know one couple who have 23 seperate businesses and are multimillionaires.
Some of the high wage earners have no more idea how the markets work than the low wage earners. And even those that do have investments often delegate everything to a broker with no oversight or third party planning.
The ceiling at which you can be sure the broker will not just churn your account and at which the brokerage is afraid of treating you badly is VERY high.
Because my wife works at a large university we are also dismayed to see that a lot of very educated people have no interest or ability in financial matters. Some of them can not even keep track of a budget to alot their grant funds in a systematic manner. Some are unable even to discipline thenselves to throw all their reciepts in a folder to submit them for expenses when they travel and are never reimbursed because they can not document their expenses.
Very few people have the ability to supervise their retirement savings.
OUR investments have done very well because we looked at the options available and said what are people really going to need first and if they have money left what will they want?
We invested heavy in natural gas production and distribution and entertainment services.
We invested computers not in software or hardware but those that service systems for others who don't have the in house talent.
I see a better market coming for those that supply materials and services for storm related damage, and retrofitting structures to proof them against such damage. There are a number of new materials related markets that are due to take off, and the biotech companies who will benifit from the exploration of the human genome. Nanotechnology is out there but within our life time - as are private lift services for space commerce. If I could find a company exploiting the wireless spectrum for off site video security I would buy them. I want a camera I can wear on my lapel and it streams video off site and records it 24 hours a day so if I am robbed or treated rudely in a store or have an auto wreck or get short changed or ticketed for speeding I have a full record to back any claims or actions I wish.
Everyone can not invest in niche markets!
If the economy as a whole does not do well someone is going to be left holding the ownership of the losers. If the investments are all diversified well it will just mean everyone is in the same boat as the economy as a whole performs. Right now Social Security depends on the performance of the economy so what would change unless individuals manage their own stocks and can be bigger winners or losers?
Your ladies could not see their jobs being tied to the stock market? You may be right but I also think people see very little relationship anymore between their job performance and their chances of being laid off or retained.
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