An honest stock market update

[electriceagle]

I saw this on another board and just had to share it with the Mustachians. It highlights the values of index fund investing and a low-information diet.

http://www.fool.com/investing/general/2014/08/12/an-honest-stock-market-update.aspx

Some of my favorite parts (emphasis added):

"Stocks gained momentum on Monday, with the Dow Jones Industrial Average closing up 48 points, reversing losses from last week's decline.
Experts hailed both moves as a "remarkable, textbook example of pure statistical chance," chalking up Monday's gains to a couple random marginal buyers being slightly more motivated than a few random marginal sellers."

and

"A report from the Bureau of Labor Statistics showed the economy added 209,000 jobs last month. An economist from a right-leaning think tank called the report disappointing. Another at a left-leaning organization called it encouraging. Neither has a reputable track record. Both yelled. The jobs report has a margin of error of plus or minus 100,000, and will be revised seven times in the coming years. No one whose outlook was swayed by the report said they care about these details. "

[marty998]

Both do yell incessantly. In the interests of balance, our public broadcaster must source quotes and interviews with both Left and Right, no matter how nutty each side is. If there is a well credentialed economist, it must be balanced with a socialist. If there is a respected climate scientist, it must be balanced by a spokesperson from the coal lobby.

Slightly on a tangent but can someone explain if this is a chicken and egg scenario / one giant loop? Where does it start and end?

The economy is doing well
Yay
Inflation is going up
Shit
Interest rates are going up
Shit
The economy is doing bad
Shit
Inflation is going down
Yay
Interest rates are going down
Yay
The economy is doing well

[This_Is_My_Username]

Maybe it started with the 1911 Commonwealth Bank Act (Australia)  (the precursor to the Reserve Bank), who had the power to set interest rates.

http://www.austlii.edu.au/au/legis/cth/num_act/cba191118o1911221/

[solon]

Sounds like something you'd see from theonion!

[arebelspy]

http://www.fool.com/investing/general/2014/08/12/an-honest-stock-market-update.aspx

That whole article was incredible.  Satire is best when it's true.  Kudos to the author.  Thanks for sharing!

[EricL]

Just for the added fun: http://www.fool.com/investing/general/2013/11/14/stupid-things-finance-people-say.aspx

[arebelspy]

Just for the added fun: http://www.fool.com/investing/general/2013/11/14/stupid-things-finance-people-say.aspx

Not quite as good, but still decent.  I like that author.

[Primm]

Nineteen-year-old Travis Baker spent the afternoon day-trading penny stocks because his prefrontal cortex isn't yet fully developed and he couldn't recognize risk-reward trade-offs if they hit him in the face.

Classic!

Disclaimer: my two sons are 21 and 23. This is them. :) They think they know more than me, but that's ok. They'll learn.

[TreeTired]

If the S&P 500 is going to get to 2500,  we will have to get through 2300 first!

Support is at 1950, but if we go through that, next stop is 1900, and we don't hold 1900 we will go lower!

[Beric01]

Thanks for posting the read, OP! Really good satire - I heartily enjoyed it. Forwarded it to my family.

[Bateaux]

Buy, buy, buy, buy, buy.  Did I mention buy?
Dollar cost average broadly.   Do it all the way up and all the way down.  In the middle, out the side, in the front and out the back.  Buy, buy, buy.

[Dicey]

I'm generally not a Fool fan, but if more of their stuff was as good as this, I surely would be.

[Beric01]

I'm generally not a Fool fan, but if more of their stuff was as good as this, I surely would be.

Same. This is the first article I've from that site that was actually decent.

[tarheeldan]

Slightly on a tangent but can someone explain if this is a chicken and egg scenario / one giant loop? Where does it start and end?

The economy is doing well
Yay
Inflation is going up (competition for resources bids up prices)
Shit
Interest rates are going up (Money demand increases)
Shit

Technological improvements and increased productivity.
Yay.

[pom]

Loved it, thanks for sharing.

Here is my favorite part:

"In Nevada, 52-year-old Ronald Palmer put his life savings into gold after spending 10 minutes reading something on Google about inflation written by a guy who learned about inflation by spending 10 minutes on Google."

[electriceagle]

If the S&P 500 is going to get to 2500,  we will have to get through 2300 first!

Support is at 1950, but if we go through that, next stop is 1900, and we don't hold 1900 we will go lower!

My prediction for tomorrow:

Either more people will want to sell than buy and the market will go down or more people will want to buy than sell and the market will go up.

Sorry, I don't do numbers. My crystal ball says "waiting for updates....."

[Beric01]

If the S&P 500 is going to get to 2500,  we will have to get through 2300 first!

Support is at 1950, but if we go through that, next stop is 1900, and we don't hold 1900 we will go lower!

My prediction for tomorrow:

Either more people will want to sell than buy and the market will go down or more people will want to buy than sell and the market will go up.

Sorry, I don't do numbers. My crystal ball says "waiting for updates....."

You need to read the second article by this author:

"More buyers than sellers."

This is the equivalent of saying someone has more mothers than fathers. There's one buyer and one seller for every trade. Every single one.

:-)