Why I’m Still Buying...

[DNP]

by Ben Stein

This is my most serious column yet. So let's get to it.
I get a fair amount of mail about the economy. Lately, much of it asks the same questions:

* What the heck happened to our economy so suddenly and powerfully that it caused the immense uproar and fear and stock market crashes we have had lately?

* Why didn't I, Ben Stein, famous so-called braino, get what was happening and why did I remain optimistic so long?

* What is the future going to bring?

First of all, obviously, I don't know what the future will bring. If I knew the future, I would be the richest man on the planet very soon and I assure you I am very far from that.

But I now see what has happened and I can explain that, and it might give a tiny bit of insight into what will happen in the future.

Start around 1995. Groups involved with civil rights issues and activities for poor people began to complain that poor people and especially non-white poor people got mortgages much less often than white well to do people. Many economists, including me, explained that it was not at all surprising that poorer, less credit worthy people were often turned down for credit. That's how credit is supposed to work: you lend to people who will pay you back.


Full column

 

[IBN]

:kev: :grouphug: :lever: :ballchain: :noidea: :usa2: :tape: :lock1: :amen:

 

[stewie]

:yo:

 

[south]

Good read!

 

[financialtraffic]

Ben Stein admitted it himself that he didn't forsee the extent of the problem, and now that he does see it, he's still a buyer. I wonder if that means he'd be a buyer regardless of any economic revelation that occurs? Heck, he might as well just say forget about results...buy buy buy and then when things crash, buy some more.

What doesn't make sense at all is that these type of problems - the boon and bust cycles - are almost always going to rock the economy and the markets. Everyone likes to talk about analyzing what happened so that we can make sure it doesn't happen again in the future.

Well guess what? In the future it's going to be a different scenario we haven't thought of or already experienced that will cause us trouble. Everyone knows that markets and economies are not linear. But they sure panic when they go down. I believe markets should go down from time to time. Where there is tremendous growth there also needs to be tremendous correction. If the market never did go down, it wouldn't be a market at all. Nobody would want to sell anything if everying went up exponentially forever.

I think what's also really going on here and why many people are now calling for everyone to buy stocks, is that a lot of people have lost a lot of money in the stock market. Most of those calling average people to action are already very old. You can be sure they want a quick reinflaction of the stock market.

They want new buyers to rush in to help inflate share prices again so they can either cash out, avoid margin calls, etc.

The stock market is just one barometer for economic activity. It's lower right now simply because things just aren't all that great for the economy. I think we'll start to get a better picture of things as we move ahead into "earnings season." We'll get news about what companies experienced and what they are projecting going forward. We'll also get new benchmarks because if companies project something going forward and their results end up worse - then we know we are in for a more protracted bottoming process.

Unless things are rosey again with earnings, projections, credit and employment, I can't see why the stock market should be reinflated again so quickly. If it is, we are going to face the same volatility of the last few weeks many times over.

But try telling that to our Government who wants to (or already has taken, I should say) take a percentage of the free market private so they can put a short term bandage on a patient who's really battling a serious viral infection.

Another thing we all must remember is that the more the goverment owns, the more diluted companies become. While it does keep companies from going bust. It seriously slows future growth prospects.

While I'm always a believer in buying the best companies when there is some sort of panic, I don't think one should rush in just because everyone else says it's the right time to do so.

The best advice I can give is that we all should remember that anyone giving us advice has a motive. Even those who have the best track record and are the most trusted.

 

[H2FC]

A very good read but to summarize I offer this....

The dems, as they always have, wanted the lower income and middle class to enjoy some of the riches of our country and that includes better housing.....

The rich bankers saw a way to let this happen and still make a big killing for themselves....

The Bush republican administration saw the dangers of what was happening but took a "hands off" policy so as to support the notion that as long as the rich get richer everything will be ok.....

The whole thing finally collapsed like a house of cards and the final result proves once again the old saying...."Pigs get fat....Hogs get slaughtered".....in this case we're all getting slaughtered!