Author Topic: Stocks soar, and most Americans just don't care  (Read 9227 times)

uranor

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Stocks soar, and most Americans just don't care
« on: July 04, 2014, 09:19:57 AM »
Some real jems in here..
Such as: "Who cares what records Dow Jones hits, it has zero reflection of our horrible economy," wrote one Twitter user this week.

http://www.cbsnews.com/news/stocks-soar-and-most-americans-just-dont-care/

I am glad to belong to the minority who cares. Thank you.

strider3700

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Re: Stocks soar, and most Americans just don't care
« Reply #1 on: July 04, 2014, 11:12:43 AM »
You have to remember a huge chunk of the population is basically financially illiterate.  They would have trouble balancing a cheque book.  Many won't understand the basics of any loans they have or how interest works. 

 Investing in the markets is way more complicated then any of that.   Add in the fact that if you don't decide to do it yourself you now have to deal with a whole lot of questionable salespeople many of which will rip you off worse then anything the market is likely to go through.    If you do decide to do it yourself things get even more complicated when it comes to picking what investments to put in what accounts.    And even then you still have to watch out for sneaky little fees that can bite you in the ass.

I'm pretty financially literate.  Hell I write accounting software for a living.  I still sunk dozens of hours into research before i started investing much of that looking up the definition of new to me words.  In the end I still didn't catch something in the fine print of my first broker and got fucked with a bullshit yearly  account fee so there went 2 months gains.   At the rate the at most people would invest that 1 fee would eat up a years gains.

So I entirely get it that lots of people are unwilling to invest in the market.    Hell I wouldn't do it if there was an easier, safer way to make gains.     Go figure the good things aren't usually easy.

GuitarStv

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Re: Stocks soar, and most Americans just don't care
« Reply #2 on: July 04, 2014, 01:20:50 PM »
I don't care.  It doesn't effect my investment strategy at all, and the news requires no actions to be taken by me.

The_Captain

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Re: Stocks soar, and most Americans just don't care
« Reply #3 on: July 04, 2014, 01:25:43 PM »
I'm not overly surprised that most people aren't benefitting, since people do seem super skittish about any investment that isn't real estate. That said, the comments on that article are the most whinypants ever. A bunch of people totally sure that there's a government conspiracy to print money to devalue their currency.

uranor

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Re: Stocks soar, and most Americans just don't care
« Reply #4 on: July 04, 2014, 01:34:27 PM »
I'm not overly surprised that most people aren't benefitting, since people do seem super skittish about any investment that isn't real estate. That said, the comments on that article are the most whinypants ever. A bunch of people totally sure that there's a government conspiracy to print money to devalue their currency.

Yeah, that was my point. It is not that (most) people don't care because they understand index investing and the fact that any Dow threshold is practically meaningless; it is because most think that there is a giant conspiracy against the "middle class." I was afraid of investing too, but at least I recognized the problem being my ignorance, picked up some books and did my homework over a couple of years.

strider3700

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Re: Stocks soar, and most Americans just don't care
« Reply #5 on: July 04, 2014, 02:15:31 PM »
I'm not overly surprised that most people aren't benefitting, since people do seem super skittish about any investment that isn't real estate. That said, the comments on that article are the most whinypants ever. A bunch of people totally sure that there's a government conspiracy to print money to devalue their currency.

I happen to believe that the insane printing of cash is devaluing the dollar.    I also believe that most of that extra cash is ending up in the market so since I can't stop them from devaluing the dollar I might as well get some of those new ones from the market.

ProfWinkie

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Re: Stocks soar, and most Americans just don't care
« Reply #6 on: July 05, 2014, 01:19:16 PM »
+1 with strider3700

robotclown

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Re: Stocks soar, and most Americans just don't care
« Reply #7 on: July 05, 2014, 03:20:38 PM »

I happen to believe that the insane printing of cash is devaluing the dollar.    I also believe that most of that extra cash is ending up in the market so since I can't stop them from devaluing the dollar I might as well get some of those new ones from the market.

This.  The stock market is fairly divorced from the economy at this point, because the printed money just goes right into the market and drives stock prices up.  Every time the fed speaks they change the definition of inflation or adjust the numbers so things look better.  But, there's really no better place to put the extra funds right now besides the stock market.

RapmasterD

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Re: Stocks soar, and most Americans just don't care
« Reply #8 on: July 05, 2014, 03:21:37 PM »
So if you own an S&P 500 ETF, are you directly trading in stocks? My opinion is YES. Yours?

Why my point? I'm SHOCKED the number of American families directly investing in stocks is 15%.

zolotiyeruki

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Re: Stocks soar, and most Americans just don't care
« Reply #9 on: July 05, 2014, 04:46:29 PM »
I'm one of those who don't care.  Why?  Because I know that the stock market is volatile.  It could crash back to 10k on Monday.  And it doesn't bug me, because I'm in it for the long haul.

TheDude

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Re: Stocks soar, and most Americans just don't care
« Reply #10 on: July 05, 2014, 05:18:08 PM »
I still finding it amazing that such a large portion of our population have no money in the market. I work with a kid hes in his late twenties and was a math major. He writes software for us. He got a call the other day form our Simple IRA provider asking why he wasn't actually investing any of the money in his account. The kids smart but just find the markets boring and so he does nothing. Makes me sad he missed one hell of an upswing because its boring.

clifp

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Re: Stocks soar, and most Americans just don't care
« Reply #11 on: July 05, 2014, 05:20:18 PM »

I happen to believe that the insane printing of cash is devaluing the dollar.    I also believe that most of that extra cash is ending up in the market so since I can't stop them from devaluing the dollar I might as well get some of those new ones from the market.

This.  The stock market is fairly divorced from the economy at this point, because the printed money just goes right into the market and drives stock prices up.  Every time the fed speaks they change the definition of inflation or adjust the numbers so things look better.  But, there's really no better place to put the extra funds right now besides the stock market.

+1 on the if you can't beat them join them sentiment.   While I agree that excess liquidity in the system is a big factor in the gains in the stock price, I think people fail to grasp how much of global economy we live it.  It is true that Europe and the US have had miserable economic growth.  Plenty of developing countries are growing at healthy rates China was 7.4%, plenty of others are in the 4-7 range%.  Heck even Iraq had 4.2% GDP last year. (it won't be pretty this year.).  All DOW companies and the vast majority of S&P 500 company have significant overseas sales, the economy doesn't look so bad from their prospective.

I must say reading the comments is depressing.

Middlesbrough

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Re: Stocks soar, and most Americans just don't care
« Reply #12 on: July 05, 2014, 09:00:23 PM »
The more it goes up, the closer to FIRE. The more it falls the better bargains are available.

slugline

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Re: Stocks soar, and most Americans just don't care
« Reply #13 on: July 05, 2014, 09:22:17 PM »
So if you own an S&P 500 ETF, are you directly trading in stocks? My opinion is YES. Yours?

Why my point? I'm SHOCKED the number of American families directly investing in stocks is 15%.

My opinion is no. Being directly invested in a stock to me means you have the right to attend the company's shareholders meeting yourself and maybe even vote for the board of directors. I don't think having a share in an ETF that happens to hold a certain company's stock gives you that.

beltim

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Re: Stocks soar, and most Americans just don't care
« Reply #14 on: July 05, 2014, 10:47:32 PM »
So if you own an S&P 500 ETF, are you directly trading in stocks? My opinion is YES. Yours?

Why my point? I'm SHOCKED the number of American families directly investing in stocks is 15%.

Your opinion is wrong. In 2011 54% of Americans owned stocks via one of several methods (401k, mutual fund, etf, or directly).  The 15% that you're talking about I think is those who directly own individual stocks - which, holding an ETF, you don't. How do I know that? Simple- there's a middleman, therefore it's not direct.

RapmasterD

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Re: Stocks soar, and most Americans just don't care
« Reply #15 on: July 06, 2014, 07:40:29 AM »
So if you own an S&P 500 ETF, are you directly trading in stocks? My opinion is YES. Yours?

Why my point? I'm SHOCKED the number of American families directly investing in stocks is 15%.

Your opinion is wrong. In 2011 54% of Americans owned stocks via one of several methods (401k, mutual fund, etf, or directly).  The 15% that you're talking about I think is those who directly own individual stocks - which, holding an ETF, you don't. How do I know that? Simple- there's a middleman, therefore it's not direct.

Great. Then I think part of the crux of the article is bogus. Who cares if I can attend shareholder meetings? I've run global PR at two different billion dollar publicly held companies. Trust me that shareholder meetings are pure BS. They are uber rehearsed, and staged. They are held at times of day and locations guaranteed to ensure that most folks can't attend them. The most antagonistic questions are anticipated and never answered truthfully. Yadda yadda yadda.

GrayGhost

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Re: Stocks soar, and most Americans just don't care
« Reply #16 on: July 06, 2014, 08:16:33 AM »
I wonder, if your 'stache hits the critical level that you'd need to sustain a 4% SWR during (what you believe to be) a stock market boom or bubble, do you keep working, or do you take advantage of your lucky timing and just retire?

The risk averse part of me says keep working, but another part of me says that as long as you stick to that magical 4% level, you should be okay in the long run.

joleran

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Re: Stocks soar, and most Americans just don't care
« Reply #17 on: July 06, 2014, 08:47:22 AM »
I wonder, if your 'stache hits the critical level that you'd need to sustain a 4% SWR during (what you believe to be) a stock market boom or bubble, do you keep working, or do you take advantage of your lucky timing and just retire?

The risk averse part of me says keep working, but another part of me says that as long as you stick to that magical 4% level, you should be okay in the long run.

If, as MMM says, you can adjust your COL or make some money on the side, and the stock market doesn't crash as hard as it's ever crashed right after you stop, and stays crashed for a decade, you should be just fine no longer working with 4% SWR.   If you're cutting it close with your COL equaling 4% of portfolio and don't want to make money in other ways, it would be safest to do 3% SWR to cover the worst sort of crashes in history.

brewer12345

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Re: Stocks soar, and most Americans just don't care
« Reply #18 on: July 06, 2014, 09:30:34 AM »
So if you own an S&P 500 ETF, are you directly trading in stocks? My opinion is YES. Yours?

Why my point? I'm SHOCKED the number of American families directly investing in stocks is 15%.

Your opinion is wrong. In 2011 54% of Americans owned stocks via one of several methods (401k, mutual fund, etf, or directly).  The 15% that you're talking about I think is those who directly own individual stocks - which, holding an ETF, you don't. How do I know that? Simple- there's a middleman, therefore it's not direct.

Great. Then I think part of the crux of the article is bogus. Who cares if I can attend shareholder meetings? I've run global PR at two different billion dollar publicly held companies. Trust me that shareholder meetings are pure BS. They are uber rehearsed, and staged. They are held at times of day and locations guaranteed to ensure that most folks can't attend them. The most antagonistic questions are anticipated and never answered truthfully. Yadda yadda yadda.

That's because shareholder meetings don't matter.  The real changes to management via shareholder action happen well before the meeting.  Wanna see examples?  Go see what happened to CHK and PTRY management in the last year or two.  He who has the gold, makes the rule.

strider3700

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Re: Stocks soar, and most Americans just don't care
« Reply #19 on: July 06, 2014, 02:28:02 PM »
The more it goes up, the closer to FIRE. The more it falls the better bargains are available.

My magic number isn't based on the size of the portfolio.   It's based on the amount of passive income I receive.   if the market drops but I continue to get exactly the same dividend payments then I'll just buy more.   These record levels are actually  slowing down FIRE for me as my purchases don't go as far.

enigmaT120

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Re: Stocks soar, and most Americans just don't care
« Reply #20 on: July 07, 2014, 09:10:17 AM »
My opinion is no. Being directly invested in a stock to me means you have the right to attend the company's shareholders meeting yourself and maybe even vote for the board of directors. I don't think having a share in an ETF that happens to hold a certain company's stock gives you that.

Also:  when you sell a real stock at a profit and have held it long enough, it's taxed as capital gains.  My understanding is that 401K profits are taxed as regular income when you withdraw them, even if most of your profits are actually from capital gains. 

dragoncar

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Re: Stocks soar, and most Americans just don't care
« Reply #21 on: July 07, 2014, 11:01:12 AM »
I don't care.  It doesn't effect my investment strategy at all, and the news requires no actions to be taken by me.

Yep.

I'm one of those who don't care.  Why?  Because I know that the stock market is volatile.  It could crash back to 10k on Monday.  And it doesn't bug me, because I'm in it for the long haul.

Yep yep.

Gerard

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Re: Stocks soar, and most Americans just don't care
« Reply #22 on: July 07, 2014, 06:36:41 PM »
If I bend over and squint, I can see where the original Twitter poster might have a point. The height of the Dow doesn't correlate with how well any particular family or town might be doing, and there are definitely occupations that have cratered and not recovered (towns here in Newfoundland that used to make money selling paper to newspapers, for example). For them, the relevant (tho overstated) quote is "the economy has recovered completely for everyone except people."


Jacob F

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Re: Stocks soar, and most Americans just don't care
« Reply #23 on: July 08, 2014, 02:05:21 AM »
People need to stop whining about the economy all the time. The economy is not an individual being. Its a sum of many different parts and aspects.
As for labor statistics, the economy is basically where it was before the 2008 crisis right now, so there's no reason to whine all the time.
As for hyperinflation a lot of people see all the time: it's not there! Check the official inflation data. Its very low compared to historical standards. If you don't believe in the measurement, check Gold prices if you wish. Also not indicating hyperinflation.

Comparing the S&P to the economy is also tricky. The S&P 500 is no measure for the economy at all. It is a stock performance index. That means that distributed dividends are being reinvested, which means that if everything remains exactly the same from one year to the other, the index would still rise by the %tage of Dividend yield in that year - not even counting profits that remain with the company at all, that would also drive up the inherent value of all businesses in the S&P. This is the compounding effect within the index.

The feeling that market levels and portfolio sizes don't matter for retirement is also not always helpful....
The dividend yield as a %tage of S&P Index Value is constantly going down, but as you can see, it's not negatively correlated with Index values in the recent decades.
http://www.multpl.com/s-p-500-dividend-yield/
That means if the index value goes down, so does your passive income as well. From 32,35 USD per 1 S&P Index in 12 / 2008 the Dividends fell to 24,12 USD per 1 S&P Index in 03/2010, thats a 25% decline. Thus, Index values do matter to passive income to some degree. Of course companies try to hold dividend stable even in rough economic times, but this only leads to a lower volatility for dividends than for the stock index as a whole. But in doing this, they pay more in dividends than they earn over certain periods of time, which is not sustainable over the long run.

It still is reasonable though to not look at market fluctuations. But not because they don't matter at all for FIRE, but instead because they are not in our control (remember that MMM article over things that are out of our own circle of influence..).

Also, people that focus on just their dividends received should take into account that you can rebalance your portfolio, from non-distributing stocks to dividend yield stocks. I bet everyone here would have loved to invest a couple of bucks in Warren Buffetts Partnership in the 1960s, although his Holding never paid a dime in dividends until this very day...

infogoon

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Re: Stocks soar, and most Americans just don't care
« Reply #24 on: July 08, 2014, 08:46:20 AM »
Quote
People need to stop whining about the economy all the time. The economy is not an individual being. Its a sum of many different parts and aspects.

As my corporate finance professor was fond of saying, "I don't know why people talk about 'the economy' like it's a guy out there doing stuff on his own."