Re: Question about President's Social Security plan

royls_at_telus.net
Date: 12/24/04 

Date: Fri, 24 Dec 2004 19:03:28 GMT

On Fri, 24 Dec 2004 07:10:56 -0800, "Richard Henry" <rphenry@home.com>
wrote:

><royls@telus.net> wrote in message news:41cb6f5e.30780462@news.telus.net...
>> On Thu, 23 Dec 2004 02:18:10 GMT, Professor James Slaughter
>> <jslaughter@criswell.edu> wrote:
>>
>> >Stocks historically outperform ALL other investments.
>>
>> That claim is false, and is based on assuming the stock owner makes
>> prescient buy-hold-sell decisions.
>>
>> The fact is, if you bought stocks and held them, you'd go broke. Very
>> few of the big-cap companies of former times even exist today.
>
>It's not everything, but the Dow Jones Industrial 30 are 3M, Alcoa, Altria
>(tobacco), American Express, American International Group (insurance),
>Boeing, Caterpillar, Citigroup, Coca-Cola, DuPont, Exxon Mobil, General
>Electric, General Motors, Hewlett-Packard, Home Depot, Honeywell, Intel,
>IBM, Johnson and Johnson, JP Morgan Chase, McDonald's, Merck, Microsoft,
>Pfizer, Procter & Gamble, SBC Communications, United Technologies, Verizon,
>Wal-Mart, and Walt Disney. All are listed by DJ as "large cap". (Note that
>not all are given the same weight. DJ tries to keep a consistent "average"
>when replacing one company with another, so they multiply the stock price
>accordingly.)
>
>The typical working career span of an American worker is 45 years.

And he will typically be retired for another 20. 65 years ago, it was
1939, the year IBM was _dropped_ from the DJIA -- and it was not until
_1979_, after almost all its growth was finished, that IBM rejoined
the Dow. If you "followed the Dow" and sold IBM in 1939 and bought it
in 1979, your investment would not even keep pace with inflation.
Very much the same sort of thing has happened with other companies:
inclusion in a major index, especially the Dow, is often virtually the
kiss of death for a company's growth. What has M$ done since it
joined the Dow, compared to what it did before?

>That
>long ago, some of these companies did not exist (Home Depot, Intel,
>Microsoft) were not considered to be big (Disney, Mal-Mart)

And McDonald's and H-P.

>or were known
>under a different name because of splits and mergers (Exxon Mobil, SBC,
>Altria). However, tracking the DJIA strategy has been shown to make money
>over the long run.

Oh, it does make money. Just not more than all other major classes of
investment. Land does better than stocks, because aggregate land rent
grows faster than GDP, while the major stocks grow slower than GDP
(because successful companies rarely grow faster than GDP after they
become big). It's no accident that most wealthy people got that way
by owning land, not stocks.

-- Roy L

Relevant Pages

  • Re: Question about Presidents Social Security plan
    ... >> The fact is, if you bought stocks and held them, you'd go broke. ... >IBM, Johnson and Johnson, JP Morgan Chase, McDonald's, Merck, Microsoft, ... If you "followed the Dow" and sold IBM in 1939 and bought it ...
    (sci.math)
  • Re: Is XOM predicted by the biggest ten of the S&P 500?
    ... the largest ten Standard and Poor stocks. ... It is finding a sort of ok match on IBM based on the top ten S&P ...
    (misc.invest.stocks)
  • Re: Sun rejects IBM buyout, IBM withdraws offer
    ... Only if people were willing to sell stocks to give IBM a controlling interest. ... When Sun Microsystems, ...
    (comp.lang.java.programmer)
  • Re: Eight reasons to buy IBM
    ... Both are rated about the same quality-wise for IT stocks. ... IBM has been flat for so ... I see a lot more HPQ products out in the stores ...
    (misc.invest.stocks)
  • Re: Just Ahead: Dow 40,000?
    ... > Just Ahead: Dow 40,000? ... > Hurricane October with forecasts saying stocks in the final three months ... > on Monday stating that their Market Model Risk Premium -- which gauges the ... > their job of lulling investors to sleep in advance of a gigantic rush to ...
    (misc.invest.stocks)