Fred's Intelligent Bear Site
Below is a collection of popular stock market FIBS espoused by the Wall Street shills who want to part you from your hard earned money. Using this list to identify charlatans may be beneficial to your wealth.
FIB: It is a new economy!
Truth: The U.S. economy is a money pit. The trade deficit is huge, and most businesses cannot even figure out how to make a real profit. A sound economy is based on the creation of goods and services, not the ever increasing creation of new debt.
FIB: The "bottom" is in.
Truth: The debt bubble economy is just beginning to unwind, and there will be no lasting bottom until the stock market takes away all the paper wealth that was created out of nothing during the bubble. We are headed for the most difficult economic times since the '70s and maybe since the '30s. There is nothing wrong with being conservative and trying to preserve your wealth. The bulls caused this mess and they are to blame for the bursting of the bubble that they created. You are not obligated to throw your money into the bulls' bottomless pit.
FIB: If the consumer would spend more, the economy would be fine.
Truth: Consumers and businesses alike are in more debt then ever in history. A new economic cycle cannot begin until all the debt is wiped out through bankruptcy and/or inflation.
FIB: The Fed can control the economy by setting interest rates.
Truth: The Fed is now trapped. Their easy money policy created a huge trade deficit and a debt bubble which is now collapsing.
FIB: Buying stocks is "patriotic."
Truth: Greedy bulls turned the free enterprise system into a giant casino. The mis-allocation of capital and excessive debt creation will cause all of us all a lot of pain before it is over. It was unpatriotic to bid the Nasdaq up to 5000. This created massive mal-investment and did far more damage to capitalism than the terrorists. There is nothing patriotic about losing money in a casino.
FIB: America will always be the best place to invest.
Truth: With our huge government, creeping socialism, draconian tax laws, and aging population, the U.S. is not the safe haven that we are led to believe.
FIB: Foreign investors will always want to invest in the U.S.
Truth: Actually, this is the truth ... for now. We criticize our government in the U.S., but most foreign governments are even worse. Problems in foreign economies have helped to boost the U.S. Dollar and have helped to extend the U.S. bubble. As long as we can maintain a strong Dollar and a huge trade deficit, we are getting a "free ride" subsidized by foreigners. The Dollars come back to the U.S. in the form of loans, stock investments, real estate purchases, etc. As long as the U.S. is viewed as an international safe haven, foreigners will continue trading real goods for U.S. paper.
Eventually, foreigners will figure out that they have been worshipping a false god (the Dollar), and they will figure out that they have been participants in the greatest welfare program ever, a program that robs foreign countries of their scarce resources in order to enrich the U.S. consumer.
In order to enjoy the fruits of foreign labor, all we had to do was elect a government that was slightly less socialist, corrupt, and irresponsible than the rest of the governments of the world ... not a very difficult task, really.
FIB: The stock market creates wealth.
Truth: The only real wealth created by the stock market is dividends. The dividend yield of the S&P is currently running at about 2%. (old source) (IndexArb.com) Unfortunately, it costs about 1% to run the stock market (brokers, analysts, mutual funds, etc.); therefore, the stock market is close to a ZERO SUM GAME. For you to win, someone else has to lose.
FIB: Dividends are not important.
Truth: Most earnings reports are examples of creative accounting. The few companies that really earn money should reward their shareholders (owners). A company that does not pay dividends will eventually squander their shareholders' money. Instead of investing profits in ventures that create wealth, they will blow it on stupid investments in other companies, or they will use it to buy back shares that were created through enormous options grants to executives. If you are the owner of a company, you should be paid first.
Before the Bush tax cut, the Government did us a huge disservice by taxing capital gains at a lower rate than dividends. This encouraged companies to play games rather than create wealth. When this bear market is over, shareholders will once again demand a dividend in exchange for the risk of holding what could easily become worthless paper.
FIB: Tech stocks do not need to pay dividends.
Truth: Most tech companies go bankrupt without ever paying a dime in dividends. Were those companies ever "worth" anything?
FIB: The NASDAQ is the best place to find "growth stocks."
Truth: The Nasdaq will eventually be an empty shell of what it once was as it truly is the JUNK market. Its demise will not mark a total and complete collapse of the economy; on the contrary, it will mark the re-birth of the free enterprise system.
The Nasdaq is a disgrace to free enterprise. It sucks up billions of dollars and burns them in the name of "growth". A communist central planning agency would do a better job allocating capital than most Nasdaq companies. When the Nasdaq ceases to be mentioned on the financial news and the QQQQ (fork you) is dissolved, it will be a good day for America.
FIB: The NASDAQ is a bargain.
Truth: The charlatans who are still pimping tech stocks would like you to believe that the NASDAQ has come down so far that it is now a bargain. Even though the bubble has burst, the Nasdaq is still an over priced pig. Giving the generous assumptions that the earnings during the bubble days were real (and they were not), and assuming a P/E of 40 (which is still ridiculous), the fair value of the Nasdaq is at most 800.
FIB: The NASDAQ is the market for the next 100 years.
Truth: It may take you a 100 years to get back the money you invest in NASDAQ stocks.
This is a classic post from Tanabear on the BearForum discussion board:
The NASDAQ is a JOKE !!!!
Tanabear -- Thursday, 15 February 2001, at 3:38 a.m.
The NASDAQ was a slick move by the powers that be in 93! It is a collection of story stocks and pipe dreams! Before it's done it will be 1/3 to 1/2 it present size. And be relegated back to what it WAS ... the JUNK market. In the mean time a sharp TRADER can make a little money with it, but its like a lady of loose morals ... Fine for a Saturday night, but you wouldn't want to take her home to meet MOTHER! AND YOU DARN WELL WOULDN'T WANT TO MARRY HER!
FIB: Watching CNBC will make you a better investor.
Truth: The endless parade of analysts, CEOs, and pro forma earnings reports on CNBC should be viewed for entertainment value only. For relatively objective financial news, I would stick with Bloomberg and Nightly Business Report. Good riddance to Rukeyser. That arrogant S.O.B. and his perma-bull lackeys had no idea how to survive a bear market. (Click here to see Rukeyser get the beating he deserves.)
FIB: The analysts you see on CNBC have some good ideas.
Truth: Here are some of my personal favorites:
- Dow 36,000
- The 2nd half recovery
- The market never goes down 3 years in a row
- The market always goes up after rate cuts
- The letter of the alphabet that the recovery will look like
- The basket of "safe" tech stocks to buy
- The "bottom"
- The "new economy"
- Productivity (Greenspan's favorite)
- Broadband and movies on demand
- B to (substitute a letter) E-Commerce
- Incubators (like CMGI)
- Hand held Internet devices
- Valuations/Earnings do not matter
- Every Chinese person will use (pick a company)'s product
(Click here to see the typical Wall Street analyst on CNBC.)
FIB: Corporate scandals are the reason people are not making money in the stock market.
Truth: People buying stocks for the long term with a general market P/E of 40 have been suckered, and they deserve to be taken advantage of by insiders. A fool and his money are soon parted. Why would anyone in his right mind buy companies that cannot make money and keep piling on debt? The stock market is supposed to be a key foundation to the free enterprise system; instead it has turned into a giant casino with everyone trying to take money from the greater fool. People who do not take the time to educate themselves on valuations and market history and instead have a blind faith in the market as if it was some kind of religion are simply asking for some fat cat insider to steal their money. Hopefully, when this is all over, America will go back to building goods and services rather than building financial pyramid schemes.
Common Knowledge FIBS
FIB: The stock market represents a huge savings account of accumulated wealth.
Truth: There is no money "in" the stock market. For an investor to realize his money "in" the stock market, he has to sell his stock to someone else. The other person has to use his savings to buy the stock. If no one has any savings (or credit), stocks become worthless because there is no one to buy them. This is why stocks cannot be considered "savings."
FIB: Just keep putting money in stocks, and your retirement will be guaranteed.
Truth: We are witnessing the greatest transfer of wealth in history. The middle class has been suckered into running up huge debts in the form of big mortgages, car loans, credit cards, and no real retirement savings. They are now in the process of being robbed by Wall Street fat cats and corporate insiders while being told to just "stay in it for the long term." By the time it is all over, the phony paper "assets" will be gone, but the debt will still have to be paid. The dream of early retirement will become a nightmare of endless debt payments. Most of the middle class will end up working until they die.
FIB: The stock market will return 8% over the long term.
Truth: The long term trend of the stock market is a return of 2% plus dividends plus inflation. The long term trend line for the Dow is now at about 8000. What this means is if you buy the Dow at 13,000, it could easily take 10 years, adjusted for inflation, just to get even.
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