A History of the Boom and Bust, 1982-2004
0060564148
Maggie Mahar
Notes
But what the New Economy’s promoters failed to mention was that major advances in technology usually benefit the consumer—not the investor.
Many were motivated, not so much by avarice, as by anxiety.
Warren Buffett was not concerned about catching the top of the wave. He was far more interested in not wiping out.
“That’s how you can tell it’s a bottom. They don’t even want to sell you the stuff.”
Maureen Allyn
Main Street and Wall Street seemed to take separate paths. As the “downsizing” that began in the eighties accelerated, Wall Street celebrated: fewer workers meant lower costs and higher profits for corporate America. On Main Street, by contrast, downsizing meant breadwinners without jobs. Layoffs also put a cap on wages. Insecure workers would not ask for raises—good news for shareholders, bad news for wage earners. Thick-skinned, the bull forged ahead. When this second phase of the bull market came to an end in December of 1994, the Dow stood at 3834—up almost 40 percent in five years.
…one of the peculiarities of Wall Street is that buyers shun a bargain…In truth, most individual investors were far more interested in where a company’s share price was headed than in the intrinsic value of the business.
…shorts must be right more often than they are wrong. This means being able and willing to do the in-depth research needed to expose slippery accounting.
…professional investors who are obsessed with money—or the idea that it makes life secure—are often less likely to succeed. When they are wrong, they have a hard time cutting their losses. Those who realize that investing is a game have the edge. They know that they cannot be right all of the time: the future is, by definition, unpredictable. This makes it much easier to ride a bull. You know that, from time to time, you will be tossed over his horns—and gored. It is part of the game.
When a bubble collapses, it usually gives back not just some, but all, of its gains.
…the poor man can become the wealthy man if he behaves as if he is already wealthy, scorning investments that do not provide income.
At all times, the odds of the market gaining 10x are similar to it dropping in half. While there is typically a worry about a bear market in the short-term, it may be in the midst of a long-term bull market.