S&P 500 in 1966: 93.3
S&P 500 in 2009: 756

CPI Deflator in 1966: 31
CPI Deflator in 2009: 211

S&P 500 annualized capital gain in the last 43 years, inflation adjusted: 0.44% per year.

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Ignoramus32252 wrote:

S&P 500 in 1966: 93.3
S&P 500 in 2009: 756

CPI Deflator in 1966: 31
CPI Deflator in 2009: 211

S&P 500 annualized capital gain in the last 43 years, inflation adjusted: 0.44% per year.


John Boggle might disagree.

Wes
--
"Additionally as a security officer, I carry a gun to protect
government officials but my life isn't worth protecting at home
in their eyes." Dick Anthony Heller

On Fri, 13 Mar 2009 19:03:00 -0500, Ignoramus32252
wrote:

S&P 500 in 1966: 93.3
S&P 500 in 2009: 756

CPI Deflator in 1966: 31
CPI Deflator in 2009: 211

S&P 500 annualized capital gain in the last 43 years, inflation adjusted: 0.44% per year.
-----------
Good point. The only nit to pick is 42 v 43 years, depending
where you start counting.

Just consider how well our athletes would appear to be doing if
the length of the foot had decreased by a factor of 6 in 42 or 43
years. We would now have people running the mile in under 40
seconds....

For table of CPI-U values
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
1966 annual average 32.4
2009 January 211.143 [latest available]

211.143/32.4 = 6.516759259

1966 S&P in Jan2009$ = 93.6 * 6.516759259
= 609.9686667

gain 1966 to 2009 in CV(Jan2009$)
= 756 - 610 = 146

2009 - 1966 = 42 years depending how/where you start

146 / 42 = 3.476936508 S&P units per year.
1966 base in 2009$ = 609.9686667

% gain/year = 3.476936508/609.9686667= 0.0057 = 0.57%/year

However this neglects the value of the dividends received and the
possible gains that an investor could have received with a DRIP
[dividend reinvestment program] over the 42 years.

Other factors not considered are the tax effects when the
companies in the "averages" or indexes, merge, liquidate, split,
etc.

Still, this does indicate the very serious skewing effect that
inflation has on the general impression of long-term "progress"
when using dollar denominated measures such as the S&P or Dow.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

Ignoramus32252 writes:

S&P 500 annualized capital gain in the last 43 years, inflation
adjusted: 0.44% per year.

Actually it is far, far worse, because losers in the index are replaced
with winners after the fact. Like they took AIG out of the DJIA.
Extinction bias and winner-picking fallacies in the extreme.

And nowadays there aren't even any winners to pick.

Long-run stock market returns converge to the probability that men are
immortal and entropy is decreasing. Sooner or later every human enterprise
vanishes, and the "miracle of compound interest" cannot resurrect the dead.

Ignoramus32252 wrote:

S&P 500 in 1966: 93.3
S&P 500 in 2009: 756

CPI Deflator in 1966: 31
CPI Deflator in 2009: 211

S&P 500 annualized capital gain in the last 43 years, inflation adjusted: 0.44% per year.


If the s&p 500 index out performs most money managers, where do you put your savings?
Obviously a savings account isn't it.

Wes

On 2009-03-14, Richard J Kinch wrote:
Ignoramus32252 writes:

S&P 500 annualized capital gain in the last 43 years, inflation
adjusted: 0.44% per year.

Actually it is far, far worse, because losers in the index are replaced
with winners after the fact. Like they took AIG out of the DJIA.
Extinction bias and winner-picking fallacies in the extreme.

Richard, I believe that S&P can be replicated and they replace
companies with an advance warning. I remember how one ocmpany whose
shares I own, was added to S&P, we had quite a bit of advance
notice.

And nowadays there aren't even any winners to pick.

Long-run stock market returns converge to the probability that men are
immortal and entropy is decreasing. Sooner or later every human enterprise
vanishes, and the "miracle of compound interest" cannot resurrect the dead.

Yep, in the long run we are all dead. Period from 1966 to 2009 can
cover someone's entire career period.

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On 2009-03-14, Wes wrote:
Ignoramus32252 wrote:

S&P 500 in 1966: 93.3
S&P 500 in 2009: 756

CPI Deflator in 1966: 31
CPI Deflator in 2009: 211

S&P 500 annualized capital gain in the last 43 years, inflation adjusted: 0.44% per year.


If the s&p 500 index out performs most money managers, where do you put your savings?
Obviously a savings account isn't it.

S&P 500 paid decent dividends along most of the way, and so it still
returned better than a savings account, with inflation taken into
account. If you sold some when it was expensive, and bought some when
it was cheap, you would have done somewhat better.

I am reading a book from 1999 right now that is called "Dow 36,000",
makes a funny reading. Its authors believed, due to their double
counting math, that stocks were worth several times more than Dow
11,000 implied.


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On Fri, 13 Mar 2009 19:03:00 -0500, Ignoramus32252
wrote:

S&P 500 in 1966: 93.3
S&P 500 in 2009: 756

CPI Deflator in 1966: 31
CPI Deflator in 2009: 211

S&P 500 annualized capital gain in the last 43 years, inflation adjusted: 0.44% per year.

Iggy. Was '66 a down or up year for the Index? That is are we
comparing two bottoms or a top value to a bottom value?

Is there a better place to put savings where it will beat inflation?

For anybody above the lowest tax bracket, stocks are a better place to
save than a savings account for tax reasons alone since stocks are
taxed at a lower rate than dividends in order to encourage people to
invest in our companies.

On 2009-03-14, GeoLane at PTD dot NET GeoLane wrote:
On Fri, 13 Mar 2009 19:03:00 -0500, Ignoramus32252
wrote:

S&P 500 in 1966: 93.3
S&P 500 in 2009: 756

CPI Deflator in 1966: 31
CPI Deflator in 2009: 211

S&P 500 annualized capital gain in the last 43 years, inflation adjusted: 0.44% per year.

Iggy. Was '66 a down or up year for the Index? That is are we
comparing two bottoms or a top value to a bottom value?

Is there a better place to put savings where it will beat inflation?

Well, S&P did beat inflation very handily, it did not lose value from
1966 until now, and paid decent dividends (that you would pay some
taxes on) during all this time. Your capital would be devastated if
you kept it from 1996 until now in a bank account.

But the return was not nearly as stellar as some rah-rah books might
make us believe.

For anybody above the lowest tax bracket, stocks are a better place to
save than a savings account for tax reasons alone since stocks are
taxed at a lower rate than dividends in order to encourage people to
invest in our companies.

You mean, dividends are taxed at lower rate than interest income,
right?

It is true now, but I think that it was not the case in the past.

Anyway, I think that despite the not so stellar return from 1966 to
now, an investor can do much better than that by buying low and
selling high, for example I think that now is "low" and whenever the
stocks get too expensive it is high. A good sign of them getting too
expensive is abundance of speculative IPOs of dubious quality. I do
not know of a good sign of prices being very low. Just a big decline
is not necessarily enough.

The difficulty with this approach is that when you buy low, you can
never time the bottom, and the times are scary (like now), and when
you sell due to prices becoming too high, you can miss a lot of
upwards action.

So if you buy, say, now, the market could go even lower and make you
feel bad.

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On Sat, 14 Mar 2009 02:43:52 -0500, Richard J Kinch
wrote:

Ignoramus32252 writes:

S&P 500 annualized capital gain in the last 43 years, inflation
adjusted: 0.44% per year.

Actually it is far, far worse, because losers in the index are replaced
with winners after the fact. Like they took AIG out of the DJIA.
Extinction bias and winner-picking fallacies in the extreme.

And nowadays there aren't even any winners to pick.

Long-run stock market returns converge to the probability that men are
immortal and entropy is decreasing. Sooner or later every human enterprise
vanishes, and the "miracle of compound interest" cannot resurrect the dead.
============
And I'll bet you don't believe in Santa Claus or the Easter Bunny
either..... :-(


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

On Sat, 14 Mar 2009 10:49:30 -0500, GeoLane at PTD dot NET
GeoLane at PTD dot NET wrote:
snip
For anybody above the lowest tax bracket, stocks are a better place to
save than a savings account for tax reasons alone since stocks are
taxed at a lower rate than dividends in order to encourage people to
invest in our companies.
snip
-----------
While widely touted, "investment" as used here is another
word/mind game. When you by a stock or bond on the secondary
markets you are investing in the "market" and not in a company.

Strictly speaking the only time buying a stock invests a dime
into a company is at the IPO. After that it is simply
speculators swapping stocks back and forth, with *NONE* of that
money going into a company for investment, economic expansion and
job generation. {question -- why then are secondary market
sales/speculation subsidized by the tax payer by the lower
"capital gains" rates? As this is not generating any "economic
added value" shouldn't the rate logically be *HIGHER* not lower?}

Even with an IPO, a significant fraction of the money is "creamed
off" by the underwriters, and even more is skimmed by the people
that got stock options before the IPO [such as high level
employees and venture capitalists] in that the money that is
raised by the sale of their stock goes to them and not the
company. The money [and the capital gains tax rate] received by
the executives and V/C may well be justified as they did create
the company, but it should not be confused with "investing" in
the company, as the company doesn't get a penny of it.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

F. George McDuffee wrote:
On Sat, 14 Mar 2009 10:49:30 -0500, GeoLane at PTD dot NET
GeoLane at PTD dot NET wrote:
snip
For anybody above the lowest tax bracket, stocks are a better place to
save than a savings account for tax reasons alone since stocks are
taxed at a lower rate than dividends in order to encourage people to
invest in our companies.
snip
-----------
While widely touted, "investment" as used here is another
word/mind game. When you by a stock or bond on the secondary
markets you are investing in the "market" and not in a company.

Strictly speaking the only time buying a stock invests a dime
into a company is at the IPO. After that it is simply
speculators swapping stocks back and forth, with *NONE* of that
money going into a company for investment, economic expansion and
job generation. {question -- why then are secondary market
sales/speculation subsidized by the tax payer by the lower
"capital gains" rates? As this is not generating any "economic
added value" shouldn't the rate logically be *HIGHER* not lower?}

Even with an IPO, a significant fraction of the money is "creamed
off" by the underwriters, and even more is skimmed by the people
that got stock options before the IPO [such as high level
employees and venture capitalists] in that the money that is
raised by the sale of their stock goes to them and not the
company. The money [and the capital gains tax rate] received by
the executives and V/C may well be justified as they did create
the company, but it should not be confused with "investing" in
the company, as the company doesn't get a penny of it.


Unka' George [George McDuffee]

Companies issue stock both before and after IPO (initial public
offering.) Sometimes the shares are skimmed by underwriters and
sometimes they are not. The overall concept of companies issuing
more stock is called stock dilution and is discussed somewhat in
wikipedia:

http://en.wikipedia.org/wiki/Stock_dilution

IPO is *not* the end of issuing stock for most companies.

In addition, a company takes a certain amount of its profits
and uses them to expand and grow. A stock has a book value:

http://en.wikipedia.org/wiki/Book_value#Stock_pricing_book_value

By owning shares, the shareholder is part of this investment
process as well.

-Wayne

"Wayne C. Gramlich" wrote in message
...
F. George McDuffee wrote:
On Sat, 14 Mar 2009 10:49:30 -0500, GeoLane at PTD dot NET
GeoLane at PTD dot NET wrote:
snip
For anybody above the lowest tax bracket, stocks are a better place to
save than a savings account for tax reasons alone since stocks are
taxed at a lower rate than dividends in order to encourage people to
invest in our companies.
snip
-----------
While widely touted, "investment" as used here is another
word/mind game. When you by a stock or bond on the secondary
markets you are investing in the "market" and not in a company.

Strictly speaking the only time buying a stock invests a dime
into a company is at the IPO. After that it is simply
speculators swapping stocks back and forth, with *NONE* of that
money going into a company for investment, economic expansion and
job generation. {question -- why then are secondary market
sales/speculation subsidized by the tax payer by the lower
"capital gains" rates? As this is not generating any "economic
added value" shouldn't the rate logically be *HIGHER* not lower?}

Even with an IPO, a significant fraction of the money is "creamed
off" by the underwriters, and even more is skimmed by the people
that got stock options before the IPO [such as high level
employees and venture capitalists] in that the money that is
raised by the sale of their stock goes to them and not the
company. The money [and the capital gains tax rate] received by
the executives and V/C may well be justified as they did create
the company, but it should not be confused with "investing" in
the company, as the company doesn't get a penny of it.


Unka' George [George McDuffee]

Companies issue stock both before and after IPO (initial public
offering.) Sometimes the shares are skimmed by underwriters and
sometimes they are not. The overall concept of companies issuing
more stock is called stock dilution and is discussed somewhat in
wikipedia:

http://en.wikipedia.org/wiki/Stock_dilution

IPO is *not* the end of issuing stock for most companies.

In addition, a company takes a certain amount of its profits
and uses them to expand and grow. A stock has a book value:

http://en.wikipedia.org/wiki/Book_value#Stock_pricing_book_value

By owning shares, the shareholder is part of this investment
process as well.


Wayne,
You aren't related to the late Ed are you?

JC

Ignoramus11807 writes:

Richard, I believe that S&P can be replicated and they replace
companies with an advance warning.

Define "replicated". The index does not count the transaction costs of
its occasional changes, making it impossible to replicate. Index funds
impose compounded burdens like management fees that are not counted in
the index. Even if you could replicate, you cannot correct the
retrospective-winner-picking fallacy embodied by the index, that the
index bears no information for the future. It is a trick that any long-
run return has any predictive significance.

Yep, in the long run we are all dead. Period from 1966 to 2009 can
cover someone's entire career period.

Yes, and it almost covers mine (counting the legacy of my thrifty
investing parents), but again, to choose any period is to make a
retrospective selection that does not predict the future.

Compounding this fallacy of winner-picking in index components, is the
winner-picking of *which index* to pick, which is why there are so many
indexes.

Here is the essence of the current crisis: the financial industry must
segregate its affairs into enterprises that concentrate on
boring/safe/trustworthy/modestly-profitable work (banks) versus
risky/speculative/highly-profitable (stocks and bonds). Banks are
supposed to be the reservoir of non-risk. When they breach that
barrier, the course to systematic collapse is inevitable. With that
principle in mind, it is easy to see the events which have led to this
crisis.

On Sat, 14 Mar 2009 10:47:40 -0700, "Wayne C. Gramlich"
wrote:

F. George McDuffee wrote:
On Sat, 14 Mar 2009 10:49:30 -0500, GeoLane at PTD dot NET
GeoLane at PTD dot NET wrote:
snip
For anybody above the lowest tax bracket, stocks are a better place to
save than a savings account for tax reasons alone since stocks are
taxed at a lower rate than dividends in order to encourage people to
invest in our companies.
snip
-----------
While widely touted, "investment" as used here is another
word/mind game. When you by a stock or bond on the secondary
markets you are investing in the "market" and not in a company.

Strictly speaking the only time buying a stock invests a dime
into a company is at the IPO. After that it is simply
speculators swapping stocks back and forth, with *NONE* of that
money going into a company for investment, economic expansion and
job generation. {question -- why then are secondary market
sales/speculation subsidized by the tax payer by the lower
"capital gains" rates? As this is not generating any "economic
added value" shouldn't the rate logically be *HIGHER* not lower?}

Even with an IPO, a significant fraction of the money is "creamed
off" by the underwriters, and even more is skimmed by the people
that got stock options before the IPO [such as high level
employees and venture capitalists] in that the money that is
raised by the sale of their stock goes to them and not the
company. The money [and the capital gains tax rate] received by
the executives and V/C may well be justified as they did create
the company, but it should not be confused with "investing" in
the company, as the company doesn't get a penny of it.


Unka' George [George McDuffee]

Companies issue stock both before and after IPO (initial public
offering.) Sometimes the shares are skimmed by underwriters and
sometimes they are not. The overall concept of companies issuing
more stock is called stock dilution and is discussed somewhat in
wikipedia:

http://en.wikipedia.org/wiki/Stock_dilution

IPO is *not* the end of issuing stock for most companies.

In addition, a company takes a certain amount of its profits
and uses them to expand and grow. A stock has a book value:

http://en.wikipedia.org/wiki/Book_value#Stock_pricing_book_value

By owning shares, the shareholder is part of this investment
process as well.

-Wayne
--------------
You are of course correct, but try to put things in perspective.

If 99.99% of "investing" is in the secondary market with *NO*
money going to the corporations/companies involved, why
concentrate on the tiny exceptions, particularly when these are
mainly reserved for the insiders, e.g. IPO allocation? This is
another case of letting "the tail wag the dog."

Anyway you slice the baloney [bulloney?], purchasing stocks in
the secondary market is an almost total delusion, if you think
you are somehow "investing" in a company, when you are actually
buying chances in a rigged lottery.

In theory your statements
In addition, a company takes a certain amount of its profits
and uses them to expand and grow. A stock has a book value:
are correct, but in practice appear to be non-operational.

As recent events have shown, most such "investments" have proven
to be highly speculative financial manipulations rather than any
reinvestment in the core businesses, frequently based more on
short-term tax avoidance/evasion than any real "value added"
potential.

You are also correct when you observe that a stock has a "book
value."

It is preciously the calculation of "book value" that is causing
much of the current market turmoil under the "mark to market"
asset valuation rules, and the apparent gross [criminal?]
understatement of liabilities, primarily defined benefit pension
obligations, "off-the-books" accounting dodges such as "special
investment vehicles," "special purpose entities," "conduits," and
a huge number of contractual guarantees / co-signed loans for
"spun-off" operations. E. g. Delphi, GMAC, and American Axle for
General Motors. Derivative [CDS] liability accounting is another
extreamly murky area, e.g. AIG.

It is not at all clear why corporations with *NEGATIVE* net
values per share in the range of hundreds to possibly thousands
[when all liabilities and "mark-to-market" asset valuation are
included], with [belated] "going concern" exceptions in their
auditors' statement in their annual reports, continue to sell for
*ANYTHING*, particularly on the major exchanges such as the NYSE
and NASDAQ. If these trade at all, they should be
OTC/pink-sheet.

Everything considered, it appears that the lower classes "invest"
in lottery tickets, and the middle classes "invest" in stocks.

FWIW -- it appears the literal lottery players may be getting
better odds and a more honest game.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

On Fri, 13 Mar 2009 19:03:00 -0500, Ignoramus32252
wrote:
snip
S&P 500 in 1966: 93.3
S&P 500 in 2009: 756

CPI Deflator in 1966: 31
CPI Deflator in 2009: 211

S&P 500 annualized capital gain in the last 43 years, inflation adjusted: 0.44% per year.
snip
----------------
FWIW

=========
Morgan Stanley Says S&P 500 to Drop 25%, Cuts Outlook
By Lynn Thomasson

March 13 (Bloomberg) -- The Standard & Poor’s 500 Index may fall
25 percent in the next few months as earnings slump for a seventh
quarter and the recession deepens, Morgan Stanley said.
snip
U.S. stocks are still expensive even after the S&P 500 dropped 52
percent in 17 months, according to a method used by Benjamin
Graham, the father of value investing and mentor of Warren
Buffett. He measured equities against a decade of profits to
smooth out distortions, a method that shows the S&P 500 traded at
14.5 times earnings yesterday, according to data compiled by Yale
University Professor Robert Shiller. At the bottom of the three
worst recessions since 1929, the average ratio fell below 10. To
reach that, the S&P 500 would have to sink more than 30 percent.

Plunge to 560

Should the S&P 500 follow Todd’s forecast, the index would tumble
to 560 and then surge 47 percent to finish 2009 at 825. Wall
Street equity strategists lost credibility last year when none
predicted a down year and the average forecast was for a gain of
11 percent, according to data compiled by Bloomberg. The stock
index plunged 38 percent, the steepest decline since the Great
Depression.
snip
-------------
http://www.bloomberg.com/apps/news?p...tbQ&refer=home


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

F. George McDuffee wrote:
On Sat, 14 Mar 2009 10:47:40 -0700, "Wayne C. Gramlich"
wrote:

F. George McDuffee wrote:
On Sat, 14 Mar 2009 10:49:30 -0500, GeoLane at PTD dot NET
GeoLane at PTD dot NET wrote:
snip
For anybody above the lowest tax bracket, stocks are a better place to
save than a savings account for tax reasons alone since stocks are
taxed at a lower rate than dividends in order to encourage people to
invest in our companies.
snip
-----------
While widely touted, "investment" as used here is another
word/mind game. When you by a stock or bond on the secondary
markets you are investing in the "market" and not in a company.

Strictly speaking the only time buying a stock invests a dime
into a company is at the IPO. After that it is simply
speculators swapping stocks back and forth, with *NONE* of that
money going into a company for investment, economic expansion and
job generation. {question -- why then are secondary market
sales/speculation subsidized by the tax payer by the lower
"capital gains" rates? As this is not generating any "economic
added value" shouldn't the rate logically be *HIGHER* not lower?}

Even with an IPO, a significant fraction of the money is "creamed
off" by the underwriters, and even more is skimmed by the people
that got stock options before the IPO [such as high level
employees and venture capitalists] in that the money that is
raised by the sale of their stock goes to them and not the
company. The money [and the capital gains tax rate] received by
the executives and V/C may well be justified as they did create
the company, but it should not be confused with "investing" in
the company, as the company doesn't get a penny of it.


Unka' George [George McDuffee]
Companies issue stock both before and after IPO (initial public
offering.) Sometimes the shares are skimmed by underwriters and
sometimes they are not. The overall concept of companies issuing
more stock is called stock dilution and is discussed somewhat in
wikipedia:

http://en.wikipedia.org/wiki/Stock_dilution

IPO is *not* the end of issuing stock for most companies.

In addition, a company takes a certain amount of its profits
and uses them to expand and grow. A stock has a book value:

http://en.wikipedia.org/wiki/Book_value#Stock_pricing_book_value

By owning shares, the shareholder is part of this investment
process as well.

-Wayne
--------------
You are of course correct,

Thank you.

but try to put things in perspective.

If 99.99% of "investing" is in the secondary market with *NO*
money going to the corporations/companies involved, why
concentrate on the tiny exceptions, particularly when these are
mainly reserved for the insiders, e.g. IPO allocation? This is
another case of letting "the tail wag the dog."

Agreed. You probably already know the answer to this question.
There are enormous benefits to society in the actual creation
of jobs, factories, brand names, etc. Of course, recently
wall street sort of lost sight of that idea, hence the total
mess. The fact that people can make/lose money on the stock
market is pretty irrelevant in the overall scheme of things.
The fact that people actually have jobs is pretty important
to society and the stock market is an important component of
creating those jobs.

Anyway you slice the baloney [bulloney?], purchasing stocks in
the secondary market is an almost total delusion, if you think
you are somehow "investing" in a company, when you are actually
buying chances in a rigged lottery.

There is a difference. In a lottery, the pot does not grow.
In the stock market, the there is underlying wealth being
created over time. (No, I am not talking about derivatives here.)

By the way, most lotteries are pretty rigged already.

In theory your statements
In addition, a company takes a certain amount of its profits
and uses them to expand and grow. A stock has a book value:
are correct, but in practice appear to be non-operational.

As recent events have shown, most such "investments" have proven
to be highly speculative financial manipulations rather than any
reinvestment in the core businesses, frequently based more on
short-term tax avoidance/evasion than any real "value added"
potential.

There is a real qualitative difference between investing in
derivatives and individual stocks. Buying into derivatives
is not real investing, whereas I would claim that buying
individual stocks is.

You are also correct when you observe that a stock has a "book
value."

It is preciously the calculation of "book value" that is causing
much of the current market turmoil under the "mark to market"
asset valuation rules, and the apparent gross [criminal?]
understatement of liabilities, primarily defined benefit pension
obligations, "off-the-books" accounting dodges such as "special
investment vehicles," "special purpose entities," "conduits," and
a huge number of contractual guarantees / co-signed loans for
"spun-off" operations. E. g. Delphi, GMAC, and American Axle for
General Motors. Derivative [CDS] liability accounting is another
extreamly murky area, e.g. AIG.

You will not find me trying to defend derivatives.

It is not at all clear why corporations with *NEGATIVE* net
values per share in the range of hundreds to possibly thousands
[when all liabilities and "mark-to-market" asset valuation are
included], with [belated] "going concern" exceptions in their
auditors' statement in their annual reports, continue to sell for
*ANYTHING*, particularly on the major exchanges such as the NYSE
and NASDAQ. If these trade at all, they should be
OTC/pink-sheet.

Everything considered, it appears that the lower classes "invest"
in lottery tickets, and the middle classes "invest" in stocks.

Actually, the middle class mostly invests in real estate due
to the mortgage tax exemption for homes. I would modify your
statement to say, the lower class "invests" in lottery tickets,
the middle class "invests" in real estate, and the upper class
"invests" in stocks.

FWIW -- it appears the literal lottery players may be getting
better odds and a more honest game.

Nah, most lotteries are rigged to favor the outfits that run them.
A casino actually offers better odds then the lottery.

-Wayne

On 2009-03-14, F George McDuffee wrote:
On Fri, 13 Mar 2009 19:03:00 -0500, Ignoramus32252
wrote:
snip
S&P 500 in 1966: 93.3
S&P 500 in 2009: 756

CPI Deflator in 1966: 31
CPI Deflator in 2009: 211

S&P 500 annualized capital gain in the last 43 years, inflation adjusted: 0.44% per year.
snip
----------------
FWIW

=========
Morgan Stanley Says S&P 500 to Drop 25%, Cuts Outlook
By Lynn Thomasson

I would pay more attention to a gnat, than to those "strategists".

i


March 13 (Bloomberg) -- The Standard & Poor?s 500 Index may fall
25 percent in the next few months as earnings slump for a seventh
quarter and the recession deepens, Morgan Stanley said.
snip
U.S. stocks are still expensive even after the S&P 500 dropped 52
percent in 17 months, according to a method used by Benjamin
Graham, the father of value investing and mentor of Warren
Buffett. He measured equities against a decade of profits to
smooth out distortions, a method that shows the S&P 500 traded at
14.5 times earnings yesterday, according to data compiled by Yale
University Professor Robert Shiller. At the bottom of the three
worst recessions since 1929, the average ratio fell below 10. To
reach that, the S&P 500 would have to sink more than 30 percent.

Plunge to 560

Should the S&P 500 follow Todd?s forecast, the index would tumble
to 560 and then surge 47 percent to finish 2009 at 825. Wall
Street equity strategists lost credibility last year when none
predicted a down year and the average forecast was for a gain of
11 percent, according to data compiled by Bloomberg. The stock
index plunged 38 percent, the steepest decline since the Great
Depression.
snip
-------------
http://www.bloomberg.com/apps/news?p...tbQ&refer=home


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

--
Due to extreme spam originating from Google Groups, and their inattention
to spammers, I and many others block all articles originating
from Google Groups. If you want your postings to be seen by
more readers you will need to find a different means of
posting on Usenet.
http://improve-usenet.org/

On Sat, 14 Mar 2009 14:54:04 -0500, Richard J Kinch
wrote:
snip
Here is the essence of the current crisis: the financial industry must
segregate its affairs into enterprises that concentrate on
boring/safe/trustworthy/modestly-profitable work (banks) versus
risky/speculative/highly-profitable (stocks and bonds). Banks are
supposed to be the reservoir of non-risk. When they breach that
barrier, the course to systematic collapse is inevitable. With that
principle in mind, it is easy to see the events which have led to this
crisis.
snip
----------
If not the crux of the matter, certainly enough to *GREATLY*
limit the damages.

This remains just as true today as it was in 1933 when
Glass-Steagall was enacted, mandating/enforcing such a
separation. The Glass-Steagall Act prohibited a bank from
offering investment, commercial banking, and insurance services,
and was based on exhaustive investigations into the causes of not
only the 1929 stock market collapse, but also the collapse of the
banking industry.

Glass-Steagall was repealed in 1999 by The Gramm-Leach-Bliley
Act, also known as the Gramm-Leach-Bliley Financial Services
Modernization Act, Pub.L. 106-102, 113 Stat. 1338, opening up
"competition" among banks (BoA, Citi, Chase), securities
companies (Merrell, Lehman Brothers, G/S) and insurance companies
(AIG, MBIA, AMBEC).
http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

On Sat, 14 Mar 2009 13:40:54 -0700, "Wayne C. Gramlich"
wrote:

As recent events have shown, most such "investments" have proven
to be highly speculative financial manipulations rather than any
reinvestment in the core businesses, frequently based more on
short-term tax avoidance/evasion than any real "value added"
potential.

There is a real qualitative difference between investing in
derivatives and individual stocks. Buying into derivatives
is not real investing, whereas I would claim that buying
individual stocks is.
---------
The point here is not an investment in individual stocks, but
what the corporate management of that stock does with the
corporations' money, raised either from stock sales or "profits,"
[or even spodulick creation].

As for the tax evasion see
http://www.guardian.co.uk/business/2...-tax-avoidance
Note that this is *ONE* international bank over *ONE* year, and
that the US banks and financial firms seem to be as deeply
involved as anyone else.

The available evidence also indicates wide use of "transfer
pricing" to conceil/shield "real" profits from US taxes by
nominally American corporations such as GM.


FWIW - Individual tax evasion also seems to be rampant. UBS by
itself has admitted to abetting up to 20,000 Americans in tax
evasion, and there are many other international banks/branches in
other tax havens such as Liechtenstein, Aruba, and Macau.
http://www.nytimes.com/2008/06/20/business/20tax.html

In too many cases, a stock purchase was a direct derivative play,
e.g. AIG, as most of the spectacular "profits" that were driving
the stock prices higher were derived from CDS derivatives and
other high risk/high leverage activities such as the lower
tranches of mortgage backed CDOs purchase with "carry trade"
borrowed money.

The corporations that engaged in this activity chose to ignore
the catastrophe that occurred to the S&Ls that borrowed short at
low interest and lent long at higher interest, when the short
term interest rates suddenly climbed, and their depositers left
in droves for the money market funds [among other opportunities
offering higher returns].


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

"Ignoramus32252" wrote in message
...
S&P 500 in 1966: 93.3
S&P 500 in 2009: 756

CPI Deflator in 1966: 31
CPI Deflator in 2009: 211

S&P 500 annualized capital gain in the last 43 years, inflation adjusted:
0.44% per year.


While your statistics are not false they don't show a true picture of
things. As with all statistics they are meant to generalize things so to
give one a clear picture of reality. Lots of times the statistics are true
but they show a picture that is not. What you have done is averaged a long
term trend with a short term event, the precipitous drop in the market we
had in the last few months. You could have done the same thing after the
market dropped 25% in 1987. By averaging the long term average with our
extreme drop over the last few months it makes it look like there were no
gains in forty years. If you had stopped your statistics in 2007 you would
have had a completely different picture. You would have a lot different
picture if you had statistics from 1966 to 2016. It's like this. If you
averaged Bill Gates' and my wealth we would both be billionaires.
Unfortunately for me that isn't really a true picture of my financial
situation. What's that saying about lies, damn lies, and statistics? Make
real sure you know what you are doing with them because they can really
confuse you if you don't.

Hawke

On Sat, 14 Mar 2009 11:47:39 -0600, F. George McDuffee
wrote:

GeoLane at PTD dot NET wrote:
snip
For anybody above the lowest tax bracket, stocks are a better place to
save than a savings account for tax reasons alone since stocks are
taxed at a lower rate than dividends in order to encourage people to
invest in our companies.
snip
-----------
While widely touted, "investment" as used here is another
word/mind game. When you by a stock or bond on the secondary
markets you are investing in the "market" and not in a company.

Strictly speaking the only time buying a stock invests a dime
into a company is at the IPO. After that it is simply
speculators swapping stocks back and forth, with *NONE* of that
money going into a company for investment, economic expansion and
job generation.
------------
Here is an example of an actual investment into a company. Note
this was a direct purchase of stock from the company with the
money going to the company rather than the purchase of shares on
the secondary market with none of the money going to the company.

===========
Abu Dhabi Deal a 'Stroke of Luck' for Daimler

By Hasnain Kazim and Bernhard Zand

Abu Dhabi has bought a 9.1 percent stake in Daimler in a deal
analysts say has come at just the right time for the German
automaker battling the global economic downturn. The stake is
expected to shield Daimler from a hedge fund takeover.

It was the kind of news the German stock market had evidently
been waiting for -- after the emirate of Abu Dhabi said on Sunday
evening it was taking a 9.1 percent stake in German auto maker
Daimler, the stock leapt as much as six percent. By midday on
Monday, the stock was still up around two percent. Analysts said
the investment by the oil-rich sheikhs would stabilize the
Stuttgart-based company which is suffering from the global slump
in auto sales. Daimler, they said, had found a new strategic
investor with a long-term focus.

While Daimler AG is world-famous, its new shareholder, Arab state
fund Aabar, is little known in Germany. The company belongs to a
complex web of state-owned and semi-state-owned investment
vehicles set up by the sheikhs of Abu Dhabi to multiply their
petro dollars.

Aabar is controlled by the state fund International Petroleum
Investment Company (IPIC), which has an investment portfolio
estimated at more than $14 billion. Daimler could use liquidity
at this time of crisis in the global auto sector.

snip
-------------------
http://www.spiegel.de/international/...615042,00.html


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).