R.I.P. Equities

Wed, 01/06/2010 - 22:13

Woah! Institutional Investor mag just arrived in mail: "The Future of Wall Street," special issue, and "R.I.P Equities" as story. Sound familiar?

Remember the BusinessWeek cover, "The Death of Equities"?

II says: "After two brutal stock market crashes, investors are questioning the conventional wisdom that stocks outperform bonds. They're systematically pullilng back from equities, and Wall Street will never be the same....The equity party is over....the cult of equities is declining in earnest. The resulting hangover could fundamentally change the game on Wall Street."

I sure hope so. Less competition would be awesome. Never thought it would happen in my lifetime.

 

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Thu, 01/07/2010 - 21:50 — John Klein

Usually these types of things

Usually these types of things come near bottoms, or at least times when the market is cheap. Although there are certainly cheap companies around, it isn't like the 70s cheap.

Also, Alice do you think its actually possible that there will be less competition. People went away in the Great Depression, but I don't think this is the same thing at all. But man would investing be easy if they did...

Sun, 01/24/2010 - 11:31 — aliceschroeder

less competition

Hi John,
As the old saying goes, forecasting is for fools. I can just tell you a gut feeling, which is worth what it sounds like - just an opinion. Some people I know will agree with this but probably others won't. What I think is that you have to have real capitulation to be at a bottom. And clearly we aren't there and competition is running rampant for the time being.

> The retail investor, based on surveys, is wary and may be out of the market for awhile. That's a form of capitulation.

> I see no sign of capitulation from professionals. The market instead is behaving as though professionals are throwing a liquidity party, in other words a carry trade on stocks ("hedged" through derivatives).

> At some point the liquidity (low interest rates) will dry up. There will be a gigantic rush of capital out of the market. I suspect that everybody believes they can unwind these trades in an orderly manner, or their hedges will hold. There is never any such thing as a soft landing.

> Bubbles end when capital is destroyed. The government has created new capital (via profits) for the professionals to play with, and this bubble will end when that capital is destroyed by speculation. Possibly, the public will demand that the government stop reloading the market this way, recognizing it as a series of wealth transfers from taxpayers into the banks' and hedge fund managers' pockets. If that happens, katie bar the door.

> It could take awhile for this to all play out. Who knows how long?

Thu, 01/07/2010 - 03:07 — Joshua Reilly

I pray everyday for less

I pray everyday for less competition! Haha

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