Wednesday, May 25, 2016

A Favorite Quote Applied

Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one. - Charles MacKay

May 25, 2016
This rally is 'false' and here's the tell: Trader

From the comments:

Pulled everything out at the beginning of the year , don't care where it goes, 30 years of up and down is enough for me. - joe

And just like that, there were N-1 remaining in the herd.

Don't get me wrong. I'm not suggesting that investors in the stock market are necessarily insane or that the stock market is currently a game of musical chairs. Only hindsight will be the judge of that.

What I will say is that hindsight won't show that what Joe did was insane. How could it? Neither missed opportunities (if the market rises) nor locking in a gain (if the market falls) are grounds for insanity.


dearieme said...

I came across this a while ago, from a book published in 2013. The subject is the US stock market.

“all of the real stock market returns over the past 111 years can be attributed to just an 18 year period – the great bull market that began in August 1982 and ended in August 2000. Without those years the real, inflation-adjusted return of stocks, without reinvesting dividends, was negative.”

dearieme said...

Aw bugger! I've checked: the book was published in 2011 not 2013; that's why the data ended in August 2010.

I understand that US stocks on average pay much smaller dividends than they used to: how that influences things I have no idea.

Stagflationary Mark said...


Dividends are actually pretty high right now if you just look at the total paid ny all companies. Adds up to about $900 billion per year.

On the other hand, there are a lot more shares now than there once were so each share's dividends are nothing to write home about.

The guy who owns a soft drink company's shares must cringe evey time a new drink sensation is launched by a competitor, especially if it's just bottled water with a $1+ price tag on it.

Warren Buffett likes companies with moats. Not so sure Coca-Cola's is as deep as it once was.