Why Stocks Are a Suckers Bet

I don’t really buy stocks anymore. I don’t believe in them. I used to believe in them and that they were a great long term investment but the truth is they aren’t. The recent collapse is proof that the only people who win aren’t the long term investors. If you invested your money in the last ten years and still have it in the market, you haven’t made a dime. I cashed out my stocks before the bubble. Don’t let people fool you- people knew this was coming. The writing was all over the wall. The second Lehman tanked and BOA said they were seeing a rise in credit card delinquencies and mortgages too, I knew that a few banks were going to go. I personally didn’t think it would be this bad but it was bound to happen. You can only live on credit for so long (are you listening federal government?) I did not lose anything. If I still had money in, it would be worth less than the initial investment.

I always tell my parents about this but they never listen. They lost a lot. I’ve been telling them for years on how to invest but they don’t listen. Actual, no one does but that’s ok- I follow buffet and soros and I generally do good. The reason? I don’t invest in the long term and I will never hire a financial planner. If those guys are so good, why are they still working? Soros and Buffet work for themselves. Why is some good telling you what to invest in and not doing it himself? hmmm hmmmm. Yeah, no thanks.

Moreover, the last decade has shown us that history doesn’t repeat it self in the market. Past performance is not a good indicator of future performance. Stocks did great since the depression. They haven’t done so how lately. People who invest in the long term get screwed. Because as Jon Stewart pointed out there are two markets: there is the market that people tell you about- “buy and hold” and then there is the real stock market- the one that happens every day and is transactional. This is the one where people buy and sell for sheer profit and cash out at the end of the day. Buffet holds ownership and preferred stocks not common stocks. Banks do the same. Day traders do the same. Why? Because they understand how it works.

And you don’t. I don’t either. Why do you want to put all your eggs in a basket you don’t really understand? The common person has little sense in investing in stocks. People pour over financial reports everyday. Do you? I don’t. Who has the time!

I do invest in stocks. But only a small small small small few. Why because I know those places. Think about the future of the world. What’s the future hold? No idea. But two things will happen: we need more water and renewable energy will be big. Oil or not, climate change will be a big issue and we’ll need renewable resources. There isn’t a lot of water in the world and the US itself needs BILLIONS in infrastructure investments. Good places to go? These two sectors. I also put a little money in Asia/India stocks just to see.

But I could lose it all which is why I only put a small amount of money in this. The stock market is all a gamble and I’m not going to gamble my savings away. I do that enough playing poker. I don’t know why anyone else would.

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4 Comments on “Why Stocks Are a Suckers Bet”

  1. jan Says:

    stocks are just an investment in companies. i still think if you pick the right companies it’s a good investment. but that is only valid if you don’t give a … about the so called stock experts. they have basically no idea and only push their own portfolio. you have to make your own research in a field that you know very well. that is of course a very long term strategy, so that part is true.

  2. Tim Says:

    Matt – your analysis of Buffet is wrong. In general he DOES invest for the long term. His investment horizon is usually at least 5 if not 10+ years. Buffet recently invested billions in GE and Goldman Sachs with a pretty generous preferred stock dividend. Although these investments are currently underwater right now, Buffet realizes these companies are going nowhere and when this crisis is past, the investments will be valuable. Now what buffet has done recently especially in late 2007 and 2008 is not make very many new asset purchases. To say that you follow Buffet and then to say that you don’t believe investing in the long term doesn’t make sense.

    You do however make some excellent points about the buy and hold investor versus day traders. Two additional thoughts -1) for the most part Buffet has been a Buy and Hold investor and he’s done pretty well.
    2) Those traders who took advantage of market swings don’t face the transaction costs that smaller investors face. I’ve looked at trying to take advantage of perceived market arbitrage opportunities and I find after factoring in transaction costs, it just doesnt make sense to do.

    I agree that renewable energy and climate change sectors will be huge. In fact I think one of the few ways to get our selves (the U.S) out of the current mess is to become energy independent. The government should be providing massive incentives to private industry to innovate and bring those new alternative energy technologies to market instead of building new roads that just put more polluting cars in the environment. If there’s anything we should be building, it would be a massive HIGH speed environmentally friend train network to de-congest our airplane infrastructure and network.

    Overall right now I see alot of under-valued/depressed companies like GE, CAT (who will probably play big in the economic stimulus spending whether you support the bill itself or not), and Microsoft (who has massive amounts of CASH on hand to whether any long (think 2-5 year) economic downturns.

  3. nomadicmatt Says:

    @Tim: You are right about Buffet. But as you point out and as I tried to, buffet gets preferred shares. An a lot of times, he gets actual ownership. I meant to say he isn’t buying common stock like the rest of us.

    That was my point. I should have been clearer. I do take the long view to investing but what gets touted to people about buy and hold is not the same was what buffet is doing.

    Also, I would not invest in microsoft. They have cash but their products suck now. The future is on the net and with integrated products. Google and Apple have beaten them to it. Look how bad they have done with Windows. I’ll give them the benefit of the doubt b/c with all that money, they could do it right and then throw lots of money into a good product to get it market share. However, if I was going to be on computers, I’d go with Google and Apple (but only after I saw who was taking over after Jobs)


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