Reply #9: notes [View All]

[rapier]

Stocks are a speculation and stocks do not represent 'ownership' in a company in any sense that isn't a nice fariytale.

Why are stocks a speculation? The value of an investment can only be determined by it's expected rate of return. I mean real cash flow return, like a dividend. Any gain in the value of an asset above inflation cannot be counted on. You can hope for it and wish for it in other words you can speculate on it.

Every one of those 'long term stocks return 10%' stories is a lie. Inevitably they are based upon indexes and the thing about indexes is that the bad are thrown out and the good put in. The Dow has only 1 stock in it from the 20s now I think. The Dow or S&P averages over time logically are a measure of nothing real. If the makeup of an average changes over time your comparing apples and oranges. Another thing about those long term claims is that stocks used to pay good dividends. Dividends returns accout for a large part of the gains claimed by the touts. THe thing is that now dividends are for shit. On the S&P something line 1.75%. That is pathetic on historic terms. At the height of the bubble in 99 the touts said, of course, stocks are savings and their gains should be calculated into the savings rate. When $7 trillion disapppeared from gross stock capitalizations you might have noticed that all that talk disappeared. Wonder why?

Stocks are 'valued' based upon the liquidity ebbing and flowing into them. So it is with any asset class. Stocks have now reached the stage of a religion or a fetish, with 3 networks and forests worth of print touting them. Most people belive the investment crap. So it goes. You cannot limit savings to simple interest bearing accounts but to the idea that the majority of ones 'savings' are in a speculative stocks is beyond absurd.

As to your parents and their savings they don't even figure into this. Nobody called them rich.