Monday, May 31, 2010

Lowering Our Expectations

April 16, 2010
Time: Why Young People Should Buy Stocks on Margin

We have just survived the worst debt-fueled binge since the Roaring '20s. Now two professors at Yale University are suggesting we introduce leverage into a new realm of our lives — our retirement portfolios.

The worst debt-fueled binge since the Roaring '20s was caused by excessive leverage. So what's the advice? More leverage of course. That just figures.

Running the numbers on more than 130 years of stock data...

130 years of stock data is certainly impressive. While we stare into the rear view mirror looking for insight from an era when none of us were even alive, here's something else we might see.

Or how about this one from 2007? I made every attempt to give the horrific chart an H.P. Lovecraft theme in order to properly do it justice.

Men of learning suspect it little, and ignore it mostly. - H.P. Lovecraft

Let's face it. Lowering our expectations about the future can be painful. There's no denying it. Better to realize the pain up front than have it blind side us though.

Haven't I seen you before? Yes.
Did you get many margin calls? Yes.
Then why are you back? I don't know.
Are you looking to risk your savings? It's possibly.
You do know that this is a risky service? [Silence]
Would you like a growth stock? Okay.
You would have said the same thing about value stocks, wouldn't you? Yes.
Would you like to invest in rabbits? Yes.
Would you like to buy this lint from my pocket? Okay.


GawainsGhost said...

Interesting you started those charts in 1960. It looks like a graph of my life.

I was looking at my stamp collection last night. I have the full series of the Revolution, the Bicentennial, the Space Program, and other historical stamps from the period, all on commemorative envelopes stamped first day of issue. The Moon Landing is also stamped on the day of the landing.

I remember that day. I was in the 3rd grade. The teacher wheeled in a black and white tv so we could all watch in real time. As I was walking home, I looked up and there was the moon in the afternoon sky. I thought, "There's a man up there." It was an amazing feeling.

I grew up in an age of wonder and optimism, endless hope for the future. Everyone believed we could all do everything, pursue our dreams.

Now not so much. Perhaps I'm jaded, because I don't like what I see going on these days. But when I talk to kids, most of them are just as confident and hopeful as I was when I was their age. I guess it's the advantage of youth.

I think the world is headed for some rough times over the next decade or so. I also think what's going to happen is that the Baby Boomers are finally going to retire and get out of the way, and the younger generation will come in and clean up their mess. Thus, I still have a glimmer of hope.

The Chinese have a saying, "May you live in interesting times." These certainly are that.

Stagflationary Mark said...


I grew up in an age of wonder and optimism, endless hope for the future. Everyone believed we could all do everything, pursue our dreams.

Me too. I wish I could say we're just turning more cynical as we get older but...

The last decade hasn't exactly been anything to "crow" about, unless one thinks of the crow as a messenger of doom. Sigh.

That said, the Internet has come so far. The ability to access information instantly never ceases to amaze me. There's always hope for a better tomorrow.

GawainsGhost said...

Yes, there is always hope.

By the way, Mark, here is an interesting interview with Janet Tavakoli on the global financial ponzi scheme.

She's exactly right, fraud is rampant. She mostly focuses on the mortgage industry but notes that the fraud extends to other markets as well, including precious metals.

Well worth a listen. The more people are informed, the greater outcry for change.

Stagflationary Mark said...


I'll make sure to check that video out. I'd watch it all right now but I have an idea for a new post that I'd like to work on first.