Risk Without Reward: 'Lost Decade for Stocks'

"The Sky is Blue," "The Earth is Round" & Other Bold Pronouncements

A disastrous ten years for the stock market ends in just a month. Will the turning of a new decade change investors' luck?

--Ben Steverman, "Stocks: The 'Loss' Decade"; Business Week (12/1/09)

If you're a long-term investor, you don't need pundits to tell you that the last decade has been a washout for stocks.

Unfortunately, that won't stop the onslaught of year-end articles surveying the damage -- or predicting what comes next.

Exactly how badly have stocks done?

Excluding dividends, the S&P 500 -- the most popular benchmark of big, U.S. stocks -- is about 20% lower today than at the beginning of the decade.

What makes that return even worse is all the volatility and gyrations you had to endure along the way.

Put it this way: unless you're a financial masochist, or somehow find eye-popping, jaw-dropping roller coaster rides entertaining . . . you're probably a lot worse for the wear.

And I'm not even getting to truly epic -- and offensive -- executive compensation, backdated stock options, lavish pensions, parachute payments, bonuses, unpoliced insider trading -- you name it.

The Choices: Up, Down -- or Flat

Which naturally leads to predicting what comes next.

Here's Steverman's takeaway:

Investors in 2009 are looking out into an unknown future. Those willing to make big bets could profit. Or they could face yet another decade of dashed hopes and shrinking 401(k)s.

Or . . . I suppose the market could end up where it started.

There, that should exhaust the possibilities!

Thanks, Ben. That's awfully bold of you . . .

P.S.: Personally, I suggest taking Mark Twain's stock market advice: 'making money in stocks is easy: only buy stocks that go up. If they don't go up, don't buy 'em.'

Or this chestnut: 'October is a particularly treacherous month for buying stocks. The others are September, November, December, January . . . . "

Cracked Crystal Ball

I'm a Contrarian Indicator (at least on stocks)

On March 9, I wrote:

Until investors are satisfied that the Madoff's of the world have been dealt with appropriately, and convincing steps have been taken to assure that there won't be any more . . . don't hold your breath waiting for a sustainable stock market rally.

--Ross Kaplan, "Bernie Madoff & the Path to Recovery"; City Lakes Real Estate Blog

So when did the Dow Jones bottom?

On March 6, at 6443.27 (intraday). Of course, it's up more than 50% since then.

On the other hand, Bernie Madoff has now been sentenced to 150 years in prison, and it appears to only be a matter of time before his inner circle is also behind bars.

P.S.: contrary (no pun intended) to popular opinion, contrarian indicators can be extremely valuable prognosticators.

Like "Opposite George" on Seinfeld, you just do the opposite. In fact, that's how I decide what movies to see: I simply ask my sister what she's seen lately that she hated.