03 June 2014

Is It a Bull, Or Is It a Steer?

Bull or bullshit??? Of late, the market pundits have been making noise with two assertions:
1) longest bull market in history
2) active investing is stupid

Well, let's see. Here's a graph of the Dow from January, 2003 to June, 2014. Notice anything interesting?
(I got this one from 5yearcharts.com)

Look closer. You'll note that the pre-Great Recession trend is re-intersected only last year. Not exactly a raging bull market, especially from the perspective of the passive pundits. And even more especially true of the passive pundits who advise "individual investors", i.e. the 401(k) crew to just buy Mr. Market. And all will be well.

Not so much. If such a passive had retired in early 2008, some/much/all of his nest egg disappeared during those four years. And given that such a passive needed moolah to house, clothe, and feed himself, just leaving it there to re-build itself wouldn't have been an option. Unless such a passive had massively over-saved, he's now living in an SRO in Watts. Those who wanted to retire in 2009 to 2014 could have avoided, nay had to avoid, doing so, in order to rebuild that nest egg. But, now they know that they've no control over when or how well they can retire. Further, given that capital is fleeing from real investment, pyramiding of fiduciary investment is the name of the game. Hello, housing!

The whole point of defined benefit retirement plans is countervailing power. Professional, active management keeps track of Mr. Market. The advantage is that booms build the capital base, while avoiding busts. The notion that the Mr. Market, long term, always gets bigger is based on a much smaller planet. Smaller in absolute population, but also, and more importantly, vastly smaller in middle class demands. Not to mention, that we're running out of resources, water and arable land in particular.

The 401(k) scam is simply that the financial sector found a way to extract evermore baksheesh from workers. With managed plans covering thousands, and even tens of thousands, of individuals, the opportunity is far smaller. Divide and conquer.

From dictionary.com:
noun, plural steers ( especially collectively ) steer.
a male bovine that is castrated before sexual maturity, especially one raised for beef.

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