Monday, August 22, 2011

Not This Again...

Look, I can forgive someone for panicking about the economy or the stock market if he/she is a layperson and doesn't really know about the economic intricacies of the Great Depression or the Savings and Loan Crisis, or whatever. But Jesus, we went through this already IN 2008! Yet again, people are wringing their hands and wondering if they should take their money out of the stock market and hide it in their mattresses.

So let's go through this again:

1. If your stock market holdings drop in value, you don't actually lose money, UNTIL YOU PANIC AND SELL IT OFF. Then you've lost that money.
2. The surest way to lose money is to hoard it in cash. If your grandpappy stuffed a dollar in his mattress in 1920 (which could have bought an entire dinner at the time) and you found it today, it wouldn't even be enough for a bottle of water. Incidentally, that's what I'm counting on for my loan balances. Ahem.

For the record, priced at 11.5x forward earnings and collectively flush with revenue, the S&P 500 is very attractive right now. In fact, the greatest appreciation I've ever realized from the market was through buying shares during the last stock market crash. Granted, I'm not 60 years old so I can stomach some volatility, but regardless, I don't understand the constant obessession with wanting to buy into already-appreciated assets.

Don't get me wrong; I still think the entire market is a gigantic Ponzi Scheme, but you could do much worse than a Ponzi Scheme so inexorably ingrained into our society.

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