Hands up if you had Southwestern Energy.
No? How about XTO Energy? Range Resources? Precision Castparts?
You should have. These were top stocks of the decade in the Standard & Poor’s 500-stock index. Ten years ago, the smartest thing you could have done with your money was to invest in these. Each $1,000 invested then would be worth tens of thousands today.
Now look at the stocks the experts told you to buy instead.
The most widely recommended — according to a quick survey at the time in the Washington Post — were America Online, Cisco Systems, Qualcomm, MCI WorldCom, Lucent Technology and Texas Instruments.
Any people who invested in that portfolio have lost about two-thirds of their money. The average stock picked at random was up 3%, including dividends.
Beware of ‘Disaster’ Picks
Money Magazine’s ‘The Best Investments for 2000 and Beyond’: down about a fifth.
The SmartMoney/Wall Street Journal Sunday picks fell by about a half. The list was heavily weighted toward technology, and most stocks plummeted. MCI WorldCom and Nortel Networks ended up in Chapter 11.
OK, it’s easy to poke fun. But it’s something to think about — especially around this time of year, when wise men once again come bearing stock tips.
The embarrassments don’t stop there. Investors have just endured an absolutely terrible 10 years — a string of crashes, crises, financial scandals, recessions and collapsed bubbles.
According to Standard & Poor’s analyst Howard Silverblatt, it has actually been the worst decade for U.S. investors on record. When you look at total returns, including dividends, we’ve even done worse than the 1930s. Investors in the S&P 500 have lost about 10% this decade.
After you count inflation, investors have actually lost about 30%. That’s even behind the inflationary 1970s, when investors lost about 23% in real terms.
And that’s if you managed to hang on. Those shaken out during the crashes of 2001-2003 and 2007-2009 may have done much worse.
The Nasdaq Composite fell about three quarters from its peak, and, of course, many technology stocks were wiped out altogether. But how much warning did investors get from the pros? Almost none.
When Barron’s, our sister publication, held its annual investment roundtable in January 2000, just two of the 10 major Wall Street figures who took part warned investors about a looming bear market. This was just three months before the Nasdaq reached its all-time high — which is still more than double where it stands today.
Avoid ‘Coffee-Cart’ Tipsters
One fund manager admitted to Barron’s that ‘I have a guy who sells me coffee in the morning, who grew up in Bombay, and he is more into the stock market than I am,’ echoing those infamous tales of stock tips from shoe-shine boys just before the Crash of 1929. Yet even that ominous sign wasn’t enough to turn the group bearish. Instead Goldman Sachs strategist Abby Cohen said the stock market was ‘roughly at fair value based upon our view of S&P profits.’ Even technology stocks were ‘not overvalued’ based on standard measures, she insisted.
Hubris, meet schadenfreude. Face, meet egg.
(Goldman Sachs notes that Ms. Cohen did turn more cautious some months later, near the peak.)
Ten years later, some things have changed on Wall Street. But plenty hasn’t.
Much of the stock-market community is still just a marketing machine that happens to sell investments, the way, say, a drugstore like CVS sells pills. (Unfair? Just a little: CVS, after all, won’t deliberately sell you bad pills.)
Investors, forewarned after the last 10 years, are better forearmed ahead of the next 10. Anyone seeking to protect his or her money needs to correct for the biases of the financial industry.
The most powerful and dangerous force on Wall Street is the herd instinct. Look out.
It’s easy and safe for most ‘investment professionals’ to stick together and recommend the same things, no matter how foolish. It’s better — for them, though perhaps not for the clients — to be wrong in a crowd than risk standing alone. Few things are more dangerous to investors than a consensus.
And there is, of course, generally a strong bullish bias on Wall Street. Even today, as usual, most stock recommendations are positive. Never mind that the market is already nine months into a recovery that has seen the S&P 500 rise more than 63% and the Nasdaq jump over 70%. (And all the while, 17% of the country is unemployed, underemployed or has stopped looking for work.)
No matter how overvalued a stock, an analyst can always be found to say it’s cheap compared to some other (even more overvalued) stock. This was common during the dotcom bubble.
It hasn’t gone away. And no matter how dangerous markets may be, someone will always warn you — just as they did in 1999 — to stay fully invested because ‘you can’t time the market.’ That this advice happens to be in their interests is, of course, mere happenstance.
Don’t Chase Highflying Stocks
These days investors have relearned that the investments everyone is talking about are usually ones you don’t want to buy. The risks of chasing a highflier generally outweigh the rewards. It takes a 100% profit to recover from a 50% loss.
The best investments are usually the ones nobody is talking about. Ten years ago, everybody was talking about which technology stocks to buy. Almost nobody was talking about gold. The Bank of England could barely give the stuff away at $260 an ounce.
As I’ve poked fun at others’ poor foresight, I had better ‘fess up to my own, too. Ten years ago, a money manager friend repeatedly urged me to sell everything and buy gold.
Did I listen? Don’t ask.
没有？那么你有天然气巨头XTO Energy的股票，或是油气生产商Range Resources和精密仪器厂家Precision Castparts的股票吗？
当时《华盛顿邮报》(Washington Post)一个快速调查显示，受到最普遍推荐的个股是：美国在线(America Online)、思科系统(Cisco Systems)、高通公司(Qualcomm Inc.)、通讯公司MCI WorldCom、朗讯科技(Lucent Technologies)和德州仪器公司(Texas Instruments)。
财智/《华尔街日报》周日版(The SmartMoney/The Wall Street Journal Sunday)选出的股票跌了将近一半。科技类股在这份清单比重很高，而且它们当中大多数都出现了重挫。MCI WorldCom和北电网络有限公司(Nortel Networks Corp.)更是根据破产法第11章(Chapter 11)关门歇业了。
标准普尔(Standard & Poor)分析师霍华德·西尔弗布拉特(Howard Silverblatt)说，这是有纪录以来美国投资者经历的最糟糕的10年。当你用包括股息的整体回报来衡量的话，我们现在的处境比上世纪30年代还要悲惨。在过去的10年中，投资标准普尔500指数的投资者损失了大约10%。
一位基金经理对《巴伦周刊》说：当时，我每天早上在一个咖啡摊买咖啡，摊主在印度孟买长大，他对股市的兴趣比我还大，这倒是和1929年股市崩盘前擦鞋童大谈股票的故事“相映成趣”。不过即使是这么不祥的信号也不足以让这些人变成悲观派。相反，高盛(Goldman Sachs)策略师艾比·科恩(Abby Cohen)当时说，基于对标准普尔成份股公司收益的分析，股市基本处于合理价值。她坚称根据标准衡量方式，即使是科技股也不存在估值过高的问题。
最好的投资往往无人议论。10年前，每个人都在谈论该买哪只科技股，却几乎没人谈论黄金。英国央行(Bank Of England)曾经以每盎司260美元的价格出售黄金，还恨不得没人买。