Thursday, July 23, 2009

Arguments Against Stocks a Contrary Indicator?

I’ve seen a great many articles lately arguing against investing in stocks. A good example is an article at Falkenblog that argues that the risk premium is actually zero. Canadian Capitalist does a good job refuting the points in this article, but the fact that so many compelling arguments against stock ownership are being written may be an indicator – or a contrary indicator. 

Canadian Capitalist concludes that “stocks seem to be priced to deliver a healthy premium in the future,” which is dangerously close to a prediction about stock prices, but I’m inclined to agree. I remain invested in stocks because of the long history of a risk premium, but I’m hopeful that we’re entering a period more favourable for stocks than the last 15 years or so. The flood of commentators arguing against stock ownership make me feel even better about owning stocks now.

2 comments:

  1. MJ: I don't think many people understand the bond market at all. This is a weakness most investor needs to address.

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  2. Henry: It would be interesting to test bond holders with a simple question: If you are holding a bond that will come due in 10 years, and long-term interest rates rise by 1%, will that increase or decrease your bond's value today?

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