The S&P is Below 1998 Levels , but EVERYTHING is Different …especially the Mood.

I got a ton of reaction from my post last week about the S&P being below 1998 levels.

There is a lot of anger about how ‘Buy and Hold’ is dead.

People that say this are LAZY. I love people like this. As Ted Knight eloquently stated in ‘CaddyShack’, ‘The World needs Ditchdiggers Too’. Buy and Hold is NOT dead and will never be a dead proposition. Buy and Hold should not mean a lifetime and not mean a daytrade. It is a state of constant flux. When you plant a garden your work is not done.

Even though the S&P is below 1998 levels, EVERYTHING has changed. We have crashed, bubbled up, crashed again, recovered and now in a new deep correction. Solar had promise, solar bubbled and now solar is in a death march (check out $tan and $fslr). Oil went from $20 to $150 and when it was $30, the ned of the world was predicted for a world of $80 oil. Not. Amazon went from zero to $100, back to $1 and now stands at $180 after hitting $225.

That’s not nothing.

In 1998, we discovered that ‘Long Term Capital’ was a tricked up leverage machine run by ‘genius’ degenerate yutz’s. In 2011, we give every small retail investor, this same power from a smart phone with an Etrade account…financial weapons of mass destruction. As my pal @upsidetrader points out in this classic post:

The SEC was busy trying to figure out what an uptick rule was, it took all their manpower, and all of these inverse ETF’s were spawned and blessed in the dark of night. A demon of trading was created during their fog of incompetence. If you’re a newer trader, not only should you not be trading this market ( you can learn a lot by just watching this fiasco), don’t trade inverse ETF’s. You will be gone in a heart beat, but you are all adults so have at it if you must.

For the markets to work great, we need participation, not blind mutual fund investing, but real participation. People owning shares in companies. I have spent thousands of hours investing, mentoring and reading about web and now mobile entrepreneurs. They are not investing in the stock market. They are investing in other entrepreneurs. They want to own things and take part in decisions. The new breed of investors, trusts SecondMarket more than the Stock Market. To be honest, so do I. It has worked for me a few times.

In 1998, Cash was KING. In 2011, Cash is King. In 2090, Cash will be king (just stored in Bank of Apple). Cash really is and will always be king.

In 1998, people kept their cash in a bank. In 2011, hedge funds keep their cash in US treasuries. Today, people are speculating that Gold will be the new cash. In 2014, that will not be the case. I just don’t know what trigger sets off that mega crisis…

In 1998, banks were the ‘new new’ thing. Investment bank IPO’s were cool. In 2011, we know that was the true kiss of death. If we could undo one thing, I guarantee that would be a great one.

For the markets to work, we need less marketing from Wall Street and more investing. We need less technology for trading and more technology for schools.

Mood matters and right now, people are pissed. Warren Buffett is worried that people lose hope. I agree with Warren about that.

No reason to be a hero in this market of 2011 just yet.


  1. Anonymous says:

    I think there are 2 different ‘Buy and Holds’.  There is responsible buy and hold, where you get out at the point when the hold part doesn’t make sense anymore. This is not dead and never will be. 

    Then there is “Buy and Hold (and ignore)”  which is also not dead, but should be. 

  2. tivoboy says:

    Yeah, I have been telling people for a few years now that one has to “buy, hold SELL, then re-buy, hold, SELL” repeat as often as necessary.  With much of peoples capital loaded in a tax advantaged account of some type the downsides to MAKING SOME TRADES (transactions really) are very low

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  4. mccartjt says:

     As @upsidetrader points out there’s no free lunch with inverse ETFs. Then there’s naked futures. Those are really bad boys! I knew of one person who tried to commit suicide after trading futures. In fact I know of someone the wrong way right now on lots of TBT ETF. He’s down about $300K. I’ve reached out to him and alas I have been unable to help him…

  5. Spooky says:

    I know its not the point of your post, but isnt it neat in some cycle-of-life way that the ‘death’ of solar via brutal margins and capacity is exactly what the technology itself needs for larger adoption?  The drop of panel prices in the last 3 months has more then compensated for FIT reductions in most markets, resulting in a project lifetime lcoe reduction.

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