Equity prices cannot be sustained at unrealistic levels forever. Eventually, markets reach equilibrium. (It's the economists version of a "universal" law.) Ideally, we could see a long period where equity prices remain relatively flat while profits and productivity grow to a level that supports current valuations. On the other hands, equity prices could fall.

I see Friday as a daytrader's downturn. A sharp decline was fed by the need to sell issues to cover margin calls. While the data is still unclear, I do not think the decline was due to individual investors reaching into 401(k)'s and dumping equities.

What will it take to make the individual investor dump long term equity positions? Personally, I see the real bear biting when the "boomers" start retiring. One can imagine the cash outflow as the boomers look for portfolios with a much lower beta (risk).

I don't worry much when the speculative investors have a bad day. With luck, market volatility will force habitual daytraders to find other hobbies. Until the mass of individual investors begins to move, I think we'll see more premature predictions of a financial apocalypse. I'm waiting to see what will happen when the boomers start cashing in... in big numbers. Does anyone know who manufactures Metamucil? (chuckle)

-- Ken Decker (kcdecker@worldnet.att.net), April 17, 2000

Answers

So Ken, I sent my sister in law $4000 to invest in mutual funds in an ira or a roth ira, don't remember which, as I try to stay detached. \

I'm happy to say she just put them into a money market account paying 5.85% until she had a chance to confer with my wife and I about an"S&P 500 green account". So we didnt' take the big hit we otherwise would have.

So, in your opinion, should we wait and see what happens in the market for a few days, or "buy it while it's a good buy" now?

In other words, is it really a "good buy" now? I doubt it, but I'm pretty stock stupid.

joj

-- jumpoff joe (jumpoff@echoweb.neet), April 17, 2000.

Joe,

I try to avoid individual investing advice. If you want a good general purpose investing web site (with a bit of humor included) try the Motley Fool.

Motley Fool

Despite the name, the "fools" are pretty smart fellows.

-- Ken Decker (kcdecker@worldnet.att.net), April 17, 2000.

Ken:

I think you've hit on a good point that I haven't seen much in the news. I'm lucky enough to be on the leading edge of the baby boomers and plan to retire within the 4-5 years. We've been slugging money into our 401k and SEP for a long time in reasonably diversified funds and have built up a nice balance. My timeline is still far enough out I'm willing to live with the volatility at this point but that's going to change in the next several years as I start transfer profit into lower risk investments. Once we actually retire, I'll probably have less than 25% of money exposed to the type of risks that we've seen in the markets last week and I'll move any profit out promptly.

Since I'm just the beginning, it difficult to believe that fund redemptions and stock sales after about 2005 are not going to start accelerating. I suspect the amount of new money coming in is not going to be enough to offset the redemptions. I wonder if this isn't going to lead to a slowly declining market that might last 20 or more years?

-- Jim Cooke (JJCooke@yahoo.com), April 17, 2000.

Don't ask Decker for advice!!! You will end up broke like the last guy Decker gave advice to. Don't you read the threads, Joe?

-- (S@w it .happen), April 17, 2000.

Timing the market and investing for retirement should really be mutually exclusive. Markets fluctuate all the time, and NOBODY really knows when the "best time" is to get in or pull out. The idea behind long term investing, which is how retirement plans should be considered, is that increases in salary and compounding interest will help make up for more volitile investments. If you're talking about a period of 20-30 years, then the only speculation you need to make is whether or not the economy will have recovered by then.

With stock investments, there is ALWAYS risk. If that makes one nervous, then one should NOT INVEST IN STOCKS. Peace of mind and the ability to sleep at night always overrule the chance to make money. You should not be thinking of your retirement investments as a day-to- day investment, watching them rise and fall. That will drive you crazy. Retirement investments are LONG TERM, which means that you WILL see declines, but you have to keep in mind that you will likely have the money there for DECADES.

So, whether or not "now" is a good time to invest should have a lot more to do with your overall investment strategy and goals, and very little to do with the state of the market at this particular time.

Just my 2 shares.

-- (hmm@hmm.hmm), April 17, 2000.

The best investment strategy might be to learn Chinese.

-- Swampthing (in@the.swamp), April 17, 2000.

Jim,

Unfortunately, I'm on the tail end of the boomers. I hope I don't face 20 years of flat stock performance, but it's possible. My solution to retirement has always been fairly simple. First, I live within my modest means. I have zero debt aside from the ubiquitous mortgage. Second, I move a fair slice of my income into a self- directed IRA. Third, my portfolio includes more than just equities. I own a decent amount of raw land and other oddments. Finally, I plan to work until at least my mid 80s. (chuckle)

I do think the boomers will drive the economy... for better or worse. If there is a rush for the door starting in 2005, we could see a nasty downturn. Right now, there is a nonrational faith in ever increasing capital appreciation. I'm not sure this faith can withstand a long, grinding bear market.

-- Ken Decker (kcdecker@worldnet.att.net), April 17, 2000.

"Right now, there is a nonrational faith in ever increasing capital appreciation."

Greater fools abound.

-- (Ilike@real.money), April 17, 2000.

JOJ, trying to make sense of the market and investing on a forum such as this will lead you to make judgement errors in the same way pessimists made judgement errors about Y2K.

Ken, with all his pomposity, has given you a good advice doing research on your own. I would expand on that by suggesting that you suggest to your sister-in-law that she learns about investment options, mutual funds, building a balanced portfolio to spread the risks and maximize return over time etc. There are several good books on this subject, and several well known and sound mutual fund company websites have excellent such tutorials.

Once you invest for growth for retirement, you must resist the temptation to follow the market day to day. It drives one crazy. Getting updates once a month is plenty. Over time, if your portfolio is well researched and balanced, it will pay off a steady growth that beats money market accounts by several points.

-- (investor@staying.the.course), April 17, 2000.

Thought I'd chime in my two cents here. First off, I'm not in the game, so I'm in no position to give advice, so I won't.

I've invested in a 401K retirement account with 90% of it leveraged to the low risk side. Figure, not much stress that way, if I lose, pretty much everybody and everything does. I've also not taken advantage of the irrational bull markets, my choice. I figure "live by the sword, die by the sword".

Sorry, I ramble.....what I meant to interject here is the conversation I heard over the local radio station here this past weekend.

Two morning DJ's were lamenting their shared loses over the past few days in their "joint" investment portfolio. Now these guys are just regular Joe's who jumped in on the investment bandwagon because "everyone" is doing it. In less than three weeks, they had lost somewhere in the neighborhood of 75% of their original stake and double that amount of "profits" they had already "earned" and let ride. If they are "any" indication of the general populace, unless things go thru a serious upturn soon, many folks are going to be thinking this way.

Most of the time they were discussing this subject, it was very critical of themselves for not "taking their money and running". If "on-air" local personalities are talking like this, what must their audience be thinking.

People, all over this country, have done incredibly questionable and irrational things, (2nd, 3rd mortgages and the such) getting funds to invest (play) in this boom market. I wonder what will happen if it doesn't continue, the fractional reserve banking system survived the potential disaster Y2K held, can the stock market survive a lack of confidence if mom and pop, Uncle Bill and Aunt Molly decide to defect. Should be interesting.

Anyway, I think I'll continue to just watch and observe. As usual, expect the best, be ready for less!!

-- Michael (michaelteever@buffalo.com), April 17, 2000.

As one of the older farts on the fourm, ask yourself whether you could make up a total loss in your lifetime. If you aren't sure, you should stick to safe investments.

For me, I'm too old to recapture capital assuming there is a market.

In our case, being safe has actually provided more than if I'd gambled with capital.

Todd

-- Todd Detzel (detzel@jps.net), April 17, 2000.

Todd

Most don't like your/our definition of safe.

-- Swampthing (in@the.swamp), April 17, 2000.

Ken, Stratfor.com postulates the same possibility in their 10 year forecast. Check it out if you haven't already.

-- Outta beer (East of the smokestack@usa.here), April 18, 2000.

For the doom zombies, don't you mean "premature ejaculation"?

Everytime the market dips its "dow tanking", "stock market in free fall" blah blah blah.

Paul Milne syndrome- diareah of the mouth, constipation of the brain.

-- (jarJ@R.boinks), April 19, 2000.