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Of Tulips and Sunglasses
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Bernie Schaeffer
Schaeffers Research.com |
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"The future is so bright that I have got to wear shades."
- Timbuk 3, The Future's So Bright, I Gotta Wear Shades
"Tiptoe to the window, by the window that is where I'll be
Come tiptoe through the tulips with me!
Tiptoe from your pillow, to the shadow of a willow tree
And tiptoe through the tulips with me!"
- Tiny Tim, Tiptoe Through the Tulips
"I said, baby, do you have no shame?
She just looked at me, uncomprehendingly, like cows at a passing train."
- Don Henley, If Dirt Were Dollars |
Let's tiptoe through the tulips for a bit with Investment Company Institute President Paul Schott Stevens, but first be sure to put on your polarized shades.
According to the Dow Jones Newswire, at a recent meeting of his organization in Palm Springs, Mr. Stevens admonished the assembled not to confuse investing in stocks with a trip to the casino, taking issue with those who say encouraging Americans to invest "is like luring them to a craps table." Mr. Stevens pointed to academic research that has found stocks offer an average annual return of about seven percent and added that by investing efficiently and at reasonable cost "you have every expectation of good returns" (italics mine).
But the best is yet to come. Mr. Stevens stated that those who take a pessimistic view of stock investments are misleading the public and may discourage Americans from taking the steps they need to save and invest for retirement.
It was bound to come to this. In an investment world where complacency and obliviousness to risk had already become boundless, it was just a matter of time until it became shameless. In a world where hundreds of billions in hedge fund money is desperately and frenetically seeking an extra percentage point or two in return, where robotically initiated program trades routinely account for more than half the volume on the Big Board, and where riskless returns are minuscule and the added return for assuming huge additional risk is likewise minuscule, John Q. Investor should have "every expectation" of achieving "good returns" presumably by investing in plain vanilla index funds.
But, of course, this fantasy is not what Mr. Stevens considers to be "misleading." In Mr. Stevens' world, it is "those who take a pessimistic view of stock investments" who are "misleading the public" and presumably setting John Q. up for a miserable retirement.
The stock market is an accident waiting to happen, and a bear market is very likely to be upon us sooner rather than later. The worst of all possible strategies for your investments is to be 100-percent invested in an index fund. The only reasonable route to survival as I see it is to invest selectively in areas of the market that have not excited Wall Street and that have attracted heavy wise guy short selling, while maintaining an aggressive cash reserve and some exposure to put options on the mega-cap blue chips.
Of course, Mr. Stevens would have you believe that my "pessimistic view" is "misleading," but consider this. If you follow my advice and I'm wrong, you may not outperform the market but you will not blow up. If you follow Mr. Stevens' advice and he's wrong, your portfolio could blow up to the point from which there will be no recovery. Finally, if I'm wrong you'll hold me accountable for it. If Mr. Stevens is wrong, his press release machine will be working overtime in the ruins, churning out stories proclaiming how "now is the best time to be investing in the stock market."
Bernie Schaeffer will be available to take your questions until Thursday, Monday April 11. Please use the form below to submit your questions. |
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