Saturday, January 1, 2011 4 comments ++[ CLICK TO COMMENT ]++

2010... The Year It Was

History books would record the year of two thousand and ten as...

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4 Response to 2010... The Year It Was

Parker Bohn
January 13, 2011 at 6:13 PM

2010... the year the Fed decided to create asset bubbles on purpose, instead of by accident.

Sivaram Velauthapillai
January 15, 2011 at 1:20 AM

Honestly, I don't really know how much the $600 billion purchase helped. Stocks were doing well even before the purchase program started.

Interestingly, so far, gold is being sold off...

Parker Bohn
January 21, 2011 at 10:55 AM

You may be right about the $600 billion, but I don't appreciate Bernanke trying! :'(

I do feel like we're in for an extended period of meager investment returns, in large part thanks to super-low interest rates.  Look how its affected the two of us.  I've accepted the poor returns, and I am trying to generate alpha through stock-picking (I'd be thrilled to know I could get 10% a year for the next 10 years).  You've been squeezed out of the market almost entirely, due to poor valuations.

If valuations were similar to when our parents were this age, you'd be fully invested, and we both could get great returns by buying just about anything (stocks, bonds, real estate).

Basically, the previous generation had the ability to transfer wealth to their future selves in a highly effective manner.  We don't have that ability at all.

Buffett has some interesting things to say about rates and returns in this 1999 article:

Sivaram Velauthapillai
January 28, 2011 at 11:20 PM

Yep, that's a great article. I read it before but it's one of Buffett's best. The interesting thing to me is how we have had two major stock market crashes in a decade (2000-2003; 2007-2009) and yet the market never really got cheap.

We'll see what happens. Did you check out Jeremy Grantham's latest? He has a nice section on bubbles.

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