{"id":1417,"date":"2011-09-30T07:11:31","date_gmt":"2011-09-30T14:11:31","guid":{"rendered":"\/blog\/?p=1417"},"modified":"2022-01-11T17:12:47","modified_gmt":"2022-01-12T01:12:47","slug":"friday-reads-lehman-crash-big-rebound","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/friday-reads-lehman-crash-big-rebound\/","title":{"rendered":"Either We Are In For A Lehman Crash, Or A Big Rebound"},"content":{"rendered":"

So the media is busy issuing contradictory advice this week. According to one thread online, the markets are in a repeat of 2008<\/a>. (i.e., the sky is falling). According to another school of thought, we are on the verge of a big rally because investors are sitting on piles of cash<\/a> \u2013 a situation that historically is the precursor to a rebound.<\/p>\n

My takeaway from all this, similar to Jeffrey Kosnett\u2019s<\/a>: Don\u2019t let panic derail your long-term strategy. If you are set to rebalance at the end of the quarter (as some people may be), go ahead and do so, even if it hurts to sell bonds and buy stocks.<\/p>\n

On a side note, one of the visual aids being used by the-sky-is-falling side of the debate made me laugh. When I was in journalism school, I took a class from Gene Roberts<\/a>, an editor who led The Philadelphia Inquirer<\/em> during its glory days. He devoted one entire session to the myriad ways you can play with the scale or other assumptions of a chart to make one point or another.<\/p>\n

Here\u2019s the chart of the performance of the MSCI AC World Index over the first part of the year, from Business Insider<\/a>:<\/p>\n

\"\"<\/a><\/p>\n

Here\u2019s the chart on a different scale and ending in the present, which makes it look a lot less scary.<\/p>\n

\"\"<\/a><\/p>\n

Tempting to try to time the market<\/h3>\n

If you buy the second scenario outlined above \u2013 that the market will rally \u2013 you may be tempted to try to time the rebound. Think again. Here is Wealthfront CIO Burton Malkiel on Investors’ Most Serious Mistake<\/a>, market timing.<\/p>\n

Sentiment against Wall Street<\/h3>\n

Small protests against Wall Street<\/a> continued this week. Ginia Bellafante<\/a> of the New York Times wrote a pretty nasty, condescending piece about the protestors. The Nation\u2019s Allison Kilkenny<\/a> defended the seriousness of the protests.<\/p>\n

Whatever you think of the media warfare, there is a backlash against the financial services industry, which hasn\u2019t gone away. The backlash is taking many forms, some more mainstream than others. Here\u2019s a serious proposal for a tax<\/a> on all financial services transactions. It faces opposition in Europe and in the United States<\/a>.<\/p>\n

Here\u2019s our own recent post delving into the conflicts of interest that pervade Wall Street: We Call Bullshit: Disclosures Don\u2019t Work<\/a>.<\/p>\n

Perspective<\/h3>\n

For perspective on the current state of the stock market, I like this piece on the Vanguard blog:<\/p>\n

Maybe a lost decade for stocks, but not for investors.<\/a><\/p>\n

The author is looking at a retirement portfolio, and focusing on the value of an employer match. But even without an employer match, a 60\/40 portfolio of stocks and bonds, based on total returns for the S&P 500\u00ae Index and the Barclays Capital U.S. Aggregate Bond Index, returned 3.85% during the time period. The key to the positive returns in the numbers he cites: not falling prey to the number one mistake made by investors, which is trading too much.<\/p>\n

See The 9 Stupid Things Investors Do, According To The Library of Congress<\/a>.<\/p>\n

\n

Disclosure<\/strong><\/span><\/p>\n

The opinions expressed by guest bloggers and\/or blog interviewees are strictly their own and do not necessarily represent those of Wealthfront Inc. Information in this or other blogs should be used at your own risk. Past performance does not guarantee future results. Securities investments involve risk; returns in such investments vary and may involve gain or loss.<\/span><\/p>\n

The S&P 500 (“Index”) is a product of S&P Dow Jones Indices LLC and\/or its affiliates and has been licensed for use by Wealthfront.<\/span><\/p>\n

Copyright \u00a9 2015 by S&P Dow Jones Indices LLC, a subsidiary of the McGraw-Hill Companies, Inc., and\/or its affiliates. All rights reserved. Redistribution, reproduction and\/or photocopying in whole or in part are prohibited Index Data Services Attachment without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P\u00ae is a registered trademark of Standard & Poor’s Financial Services LLC and Dow Jones\u00ae is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

So the media is busy issuing contradictory advice this week. According to one thread online, the markets are in a repeat of 2008. (i.e., the sky is falling). 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