Year 2010: Americans on the Stock Market

I found two interesting anonymous comments on Yahoo recently:

1. "The U.S. stock market is becoming like the Japanese stock market. If you had $40,000 in the Japanese stock market in 1990, you'd have $10,000 today. [Note: I have no idea if this is true.] There's long term "investing." Expect the U.S. stock market to rally every once in awhile, and continue to fall for the next 20 or 30 years. Wall Street is just a big casino. At least you get free beer in Vegas when they take your money."

2. "How can the small investor participate with any level of confidence in a market controlled by hedge funds and other large institutional investors utilizing program trading capable of manipulating the market? Additionally, small investors make buy and sell decisions with information made available to large investors earlier in the game. Who can they turn to for objective advice and opinions? Standard & Poors? Moodys? Audited financial statements? The events of 2008 made it quite evident these were completely unreliable. How could firms like Bear Stearns and Lehman Brothers, big banks like Wachovia, Washington Mutual and Countrywide go down the drain so quickly when just months, weeks and even days before, these institutions were considered sound investments by the "experts"?

But, first and foremost, how can anyone hold stocks believing they are investments when even the experts refer to that as a gamble or a bet? Long-term investing is dead. And while the pros may lament the departure of the small investor from the stock game, it was them who caused it to happen. This game is not played on a level field. The average person is better advised to keep their money safe. Slow growth is better than no growth or the loss of principal."

HAL and Wall Street

From Timothy Lavin (The Atlantic, August 2010):

By some estimates, algorithms now trigger 70 percent of all trades in U.S. equities. The speed and volume of everyday trading have propelled the market into a new and esoteric dimension, and rendered traders in the pits largely obsolete. Average daily share volume on the New York Stock Exchange increased by 181 percent between 2005 and 2009, while the time required to execute a trade on its electronic systems dropped to 650 microseconds.

Over 2/3 of all trades are made by computers? Who is looking out for the buy-and-hold investor? Seems like all the benefits go to the speculators these days. More here.

Update on Stock Market

On January 20, 2010, prior to the market opening, I indicated the stock market would decline to around 1000. See HERE. From January 19 to February 5, the S&P declined from 1,150.23 to 1066.19--a drop of 7.3%. I recently dipped my toe in the market, buying dividend-paying stocks, but now I'm not sure if the S&P will decline to 1000. If the market continues to decline to 1000 or 900, I will double down. I kept some gunpowder for another shot, which makes me feel better if the market does in fact decline to 1000 or less.

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