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Posted on 10/16/18 at 6:51 am to TheUSC
Yes ... ride it out, especially if you're under the age of 50. Mine will go to my wife, in a Trust, for the kids when I die, when she passes, so I'll be riding-out whatever in perpetuity.
It always goes back up and will continue to do so as long as this country remains Capitalist and free. And if that ever comes to an end ... none of it will matter.
It always goes back up and will continue to do so as long as this country remains Capitalist and free. And if that ever comes to an end ... none of it will matter.
Posted on 10/17/18 at 7:14 am to TheUSC
Buyer Beware
The investing model prior to the 1980's and the .com era
Invest in individual stocks by average Americans over time with the aim of having a nest egg by retirement. Usually based on growth early in your career and income later in your career. Most solid US companies once they matured from growth to cash cows passed that on to their shareholders in the form of dividends to live off of in their golden years. If you bought P&G over time the dividends allowed you to buy their goods. Buying GE helped you afford their appliances. Buying GM helped you with the down payment on a car.
This was a good system as it spread the wealth of corporate America out across the country and had great impact on economies all across the USA.
Beginning with Reagan and the "greed is good" generation of the early 1980's management now felt entitled to the wealth of their companies and instead of adopting 25 year windows they shifted to 25 weeks. Individual investors were spoon fed the mantra that mutual funds were better than individual stocks and your mom and pop folks that had ridden the market in the 40's, 50's, 60's, and 70's were supplanted by private equity taking control and shifting wealth to limited areas of the country. Junk bonds and folks like KKR eroded what made the market great for the citizens of the country.
A classic example was Microsoft who is still below water if you invested in the 80's yet went on to become a monopoly while still not rewarding their shareholders with a reasonable dividend. Apple is hoarding what, 300 billion in cash while overcompensating those at the top and giving the investors nothing for holding the stock. Neither Apple or Microsoft have been growth companies since the 1980's. Lest you think this is sounding alarmist, consider GE who was a mainstay for almost a century in the hands of mom and pop investors and a much more secure retirement than Social Security.
Welch took over in the "greed is good" era and transformed them from a well diversified holding company to one that was heavily weighted in financials (roughly 50% at peak up from their historic levels of 10% to 15%) just ahead of the 2008 crash. Blinded by short term returns over multi decade returns was a recipe for disaster but Welch did not care as his multi million dollar perks and bonus checks rolled in to his personal gain. All the while cutting the money to the real reason for GE's historic success in the value (off the books) of the intellectual value of their work force. This came to a head (for me) when I attended the GE annual meeting about 15 years ago and saw all the "lifers" relegated to the upper deck seats so their voices could be ignored.
I sold my GE stock the next day (around $40) and walked away. I have watched the stock and dividend fall since until they got on the radar of Nelson Peltz who claims to be an advocate investor yet is neither. Advocates champion the best long term solutions but Peltz was in it for himself and in the 1980's we called the folks greenmailers. Investors are folks looking to hold long term by building long term businesses. Peltz was looking for quick wealth by breaking up the company and selling off the pieces for quick cash. Good for his wallet but bad for the wallets of folks caring about the long term health of the company. GE post Peltz is trading around 10 dollars today and the dividend has been slashed and will probably be eliminated (further reducing demand to hold the stock).
Now the company has been stripped of valuable assets at fire sale prices and GE has been delisted from the DJIA after 110 years. He has already wrecked several companies and now he has forced a seat on P&G's board with the goal of breaking the company off and selling the pieces to the Europeans and Brazilians. Sure it will enrich him, but this only makes sense if those jobs in America are relocated overseas where the much lower salaries offset the acquisition costs. P&G has about 100K direct jobs and possibly 500K indirect jobs (using a 5x multiplier) and factories and headquarters in the USA. In addition, about 10% to 15% of War Mart sales are P&G products (so much so that the "secondary" P&G HQ - was built in NW Arkansas about 20 years ago).
TL : DR
The shell game has been stacked since the 1980's to create corporate monarchies over actually rewarding long term stewardship benefitting the average American household. This will not reverse until management returns the fruits of capital back to their workers (via US jobs and wages) and their investors (via dividends and non accounting growth) in reasonable percentages to return to real long term value investing.
The investing model prior to the 1980's and the .com era
Invest in individual stocks by average Americans over time with the aim of having a nest egg by retirement. Usually based on growth early in your career and income later in your career. Most solid US companies once they matured from growth to cash cows passed that on to their shareholders in the form of dividends to live off of in their golden years. If you bought P&G over time the dividends allowed you to buy their goods. Buying GE helped you afford their appliances. Buying GM helped you with the down payment on a car.
This was a good system as it spread the wealth of corporate America out across the country and had great impact on economies all across the USA.
Beginning with Reagan and the "greed is good" generation of the early 1980's management now felt entitled to the wealth of their companies and instead of adopting 25 year windows they shifted to 25 weeks. Individual investors were spoon fed the mantra that mutual funds were better than individual stocks and your mom and pop folks that had ridden the market in the 40's, 50's, 60's, and 70's were supplanted by private equity taking control and shifting wealth to limited areas of the country. Junk bonds and folks like KKR eroded what made the market great for the citizens of the country.
A classic example was Microsoft who is still below water if you invested in the 80's yet went on to become a monopoly while still not rewarding their shareholders with a reasonable dividend. Apple is hoarding what, 300 billion in cash while overcompensating those at the top and giving the investors nothing for holding the stock. Neither Apple or Microsoft have been growth companies since the 1980's. Lest you think this is sounding alarmist, consider GE who was a mainstay for almost a century in the hands of mom and pop investors and a much more secure retirement than Social Security.
Welch took over in the "greed is good" era and transformed them from a well diversified holding company to one that was heavily weighted in financials (roughly 50% at peak up from their historic levels of 10% to 15%) just ahead of the 2008 crash. Blinded by short term returns over multi decade returns was a recipe for disaster but Welch did not care as his multi million dollar perks and bonus checks rolled in to his personal gain. All the while cutting the money to the real reason for GE's historic success in the value (off the books) of the intellectual value of their work force. This came to a head (for me) when I attended the GE annual meeting about 15 years ago and saw all the "lifers" relegated to the upper deck seats so their voices could be ignored.
I sold my GE stock the next day (around $40) and walked away. I have watched the stock and dividend fall since until they got on the radar of Nelson Peltz who claims to be an advocate investor yet is neither. Advocates champion the best long term solutions but Peltz was in it for himself and in the 1980's we called the folks greenmailers. Investors are folks looking to hold long term by building long term businesses. Peltz was looking for quick wealth by breaking up the company and selling off the pieces for quick cash. Good for his wallet but bad for the wallets of folks caring about the long term health of the company. GE post Peltz is trading around 10 dollars today and the dividend has been slashed and will probably be eliminated (further reducing demand to hold the stock).
Now the company has been stripped of valuable assets at fire sale prices and GE has been delisted from the DJIA after 110 years. He has already wrecked several companies and now he has forced a seat on P&G's board with the goal of breaking the company off and selling the pieces to the Europeans and Brazilians. Sure it will enrich him, but this only makes sense if those jobs in America are relocated overseas where the much lower salaries offset the acquisition costs. P&G has about 100K direct jobs and possibly 500K indirect jobs (using a 5x multiplier) and factories and headquarters in the USA. In addition, about 10% to 15% of War Mart sales are P&G products (so much so that the "secondary" P&G HQ - was built in NW Arkansas about 20 years ago).
TL : DR
The shell game has been stacked since the 1980's to create corporate monarchies over actually rewarding long term stewardship benefitting the average American household. This will not reverse until management returns the fruits of capital back to their workers (via US jobs and wages) and their investors (via dividends and non accounting growth) in reasonable percentages to return to real long term value investing.
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