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I don't really worry about the stock market very much since I have a
long-term horizon and don't "trade" the S&P very much, but it seems that
many traders and observers seem to focus on whether/when the market will
"crash."
I submit that there's another scenario to be concerned about -- at least in
the medium term (2-5 years). Perhaps the market won't crash. Maybe it will
just die.
When I was about 11 or 12 years old or so, I began to venture off the
comics pages of the newspaper and discovered the financial section. My
father explained to me what all the numbers were, what a P/E ratio was,
what the difference between a bond and a stock was, etc.
He was basically a buy and hold guy (still is!) but to help me develop my
interest in this area, he suggested I keep a chart of all his stocks. I
charted the weekly close of each of about 25 stocks in his portfolio.
This period was in the early seventies and it was a rough one. There was no
"crash" per se, but week after week, month after month, stock prices
drifted down, down, down. It was pretty demoralizing. I think my dad's
portfolio went down by about 35% over that two-year bear market in 73-74.
In fact, I remember having to "rechart" a few stocks because the prices
went below the scale I'd used. (This was on paper, no computers back then
-- except we might have had Pong!)
Now I realize that times were much different then. The energy markets were
haywire and inflation was high, but today you could construct a scenario
where there is no crash, but a new tide forms that drags the equity markets
gradually ever lower for a few years.
I kept up my charting until I replaced bulls and bears with sex, drugs and
rock and roll.
-RB
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