How Sick Is the Stock Market?

> What else would you have us expect?

I wouldn't expect unsubstantiated claims that have no basis in reality to be stated as plain fact, as in:

> the trend over a decade or more will always be "up".

This statement is demonstrably falsifiable since we've had several decades where the inflation-adjusted returns of the stock market are negative.

> Anything that would make that untrue would make your investment balance unimportant.

I'm sorry, but reframing your false statement in terms of a false dichotomy (the either the U.S. stock market is going up, or your investments are worthless) does not make things right. The double-negative rule doesn't apply here.

Say that to Japanese investors. The market has not been up in the last 25 years.

Real estate and stock market performance are actually very co-related but with some delay. If one gets in downturn, other would follow sooner or later. The difference is that real estate can absorb more shocks and it requires consistent long term downturn in stocks before real estate reacts. Typically real estate is not a favorable way to invest money except when you are very long term. It has huge liquidity problem and it usually has lower returns due to maintenance, property taxes, rental churn, natural disasters and property depreciation costs due to aging. For example, if you had invested in real estate in 2007 you would not have broke even until late 2014 (that's 7 years of wait to get 0% profit). There are obviously exceptions, usually in urban area where no new constructions will occur. Also if you are living in the property then you can subtract rental cost that would put you ahead in ~20 year cycle. But if you are investing heavily in real estate as investment you are gambling in even bigger casino than stock market.

I would fully expect real estate to go down in drain within next 6 months if stock market doesn't improve. This might cause all the private funds that had been buying up tons of properties to take a flight. This would accelerate the downturn in real estate more severely. Lot of people might get badly burned by this but this time it would be mostly private investors as opposed to people who got subprime.

You have some good points but you are edging on to alien abduction conspiracy mode. Yes, few handful of private firms like Blackrock, PIMCO etc have huge control over stock market. They have trillions of dollars to play with (mostly funded by public through 401Ks). They can make or break market by inducing fear or happiness with a small chunk of selloff or buyoff anytime they wish. Yes, stock of the company has little correlation with actual returns (aka dividends) and it's all about speculating. Stock market is in essence legally sanctioned casino and unfortunately few of the only alternatives for investment for general public who can't start their own companies.

What's the solution? It's actually very simple. Heavily tax any short term gains. Something like 90% if you sell in 1st year, 45% if 2nd year and so on. Make dividend income completely tax free. This will force people to use stocks as actual investment and companies to actually share earnings with shareholder (who are by definition partial owner). This can put an end to lot of speculation because your gains would simply be taken away if you do so. It might even end boom bust cycles because there won't be massive sell offs to cash out or algorithm day trading. It will give security to companies so they don't have to live in constant fear of stock tanking next quarter just because it happened to be little bad.

Number one thing I can think of is to figure out a way to prevent HFT algorithms. Put a 1 second timer on and put taxes on those trades, to prevent the whole "my fiber line is .2 ms faster to NY than yours" trading arbitrage. The more fundamental issue of corruption at every level though is still not addressed by this.

"You have some good points but you are edging on to alien abduction conspiracy mode."

I respect all the points you have made except for this one. I very clearly stated things that are fact based, with some speculation and broad-generalization, but to then equate that with "edging on to alien abduction conspiracy mode" is very frustrating to see. I understand the trepidation of even coming close to "conspiracy theory" subjects for fear of being somehow tainted by the crazy, but the history of the world was built on conspiracy, so to ignore the factual and everyday conspiracy that is verifiable under the banner of lumping it in with the crazier stuff is doing your own ability to critically think about a subject a disservice. Again, I understand the reaction, but I think it is one we need to guard against, as it is some strange form of logical fallacy that combines ad hominem and strawman.

To encase my point, did you know that the CIA really pushed the term "conspiracy theory" as a discrediting technique in 67 after outcry grew that the Warren Commission didn't do it's job? (which it didn't..).

"2. This trend of opinion is a matter of concern to the U.S. government, including our organization.

The aim of this dispatch is to provide material countering and discrediting the claims of the conspiracy theorists, so as to inhibit the circulation of such claims in other countries. Background information is supplied in a classified section and in a number of unclassified attachments.

3. Action. We do not recommend that discussion of the [conspiracy] question be initiated where it is not already taking place. Where discussion is active addresses are requested:

a. To discuss the publicity problem with and friendly elite contacts (especially politicians and editors) , pointing out that the [official investigation of the relevant event] made as thorough an investigation as humanly possible, that the charges of the critics are without serious foundation, and that further speculative discussion only plays into the hands of the opposition. Point out also that parts of the conspiracy talk appear to be deliberately generated by … propagandists. Urge them to use their influence to discourage unfounded and irresponsible speculation.

b. To employ propaganda assets to and refute the attacks of the critics. Book reviews and feature articles are particularly appropriate for this purpose. The unclassified attachments to this guidance should provide useful background material for passing to assets. Our ploy should point out, as applicable, that the critics are (I) wedded to theories adopted before the evidence was in, (II) politically interested, (III) financially interested, (IV) hasty and inaccurate in their research, or (V) infatuated with their own theories."

http://www.washingtonsblog.com/wp-content/uploads/2015/02/CI...

http://www.washingtonsblog.com/wp-content/uploads/2015/02/CI...