Set forth below is the text of a comment posted by Marc to the Guest Blog Entry that I wrote titled Investing Is a Political Act:
Well thought out and well written post, but it misses a few things.
The current crisis isn’t the result of inflated stock prices. Those prices are just a symptom of the Fed’s inflating the money supply. That may seem a bit wonky, but it’s a very important distinction, and needs to be understood.
The reason so many people lost so much is due to two things, and they both revolve around a lack of proper education.
1) People put their life saving into a system they really know nothing about. They THINK they know it, but they don’t. If they understood the real risks, and their alternatives, I bet 90% of those in the market wouldn’t be there at all. The problem is that most people don’t invest… they speculate. And there’s a BIG difference between the two.
2) There’s a whole mythology that’s grown up around the financial services industry in general, and the stock market specifically. These myths serve only to keep folks ignorant of market realities, and to line Wall Street’s pockets. They’ve done very well at both.
The only thing wrong with the late, great bull market is that it spawned a generation of “investors” — and equities sales people — who believe that aberrational period in our nation’s history is normal, and who continue to speculate in the blind hope that it will happen again. AND they expect it to happen after the bursting of the biggest credit bubble in history. If it weren’t so sad, it would be funny.
I fear these “children of the bull market” will have some very hard lessons to learn.
I don’t feel good writing that. I don’t want anyone to lose anything. Believe it or not, I’m really trying to save the few who may read this and then decide to question the “common wisdom.”
It’s funny… when the Baby-Boomers were growing up, they questioned authority at every turn. That was a good thing. However, something happened. Once they got some money, they dumped all their healthy skepticism, and swallowed Wall Street’s — and the government’s — baloney… hook, line, and sinker. What happened?
Please do some serious research. And I don’t mean that stuff you get from your broker. I mean some real research. And this is coming from a baby-boomer and reformed stock broker.
Well… I’d say that’s my 2 cents… but that title’s been spoken for around here. But, in my opinion, her advice is worth at least twice what. Listen to her… you’ll learn a lot, and you’ll save yourself a lot of grief.