The stock market has for the past few years climbed up the classic wall of worry. Ignoring higher oil prices, problems in the US housing market, and everything else the market advanced to record highs, briefly reaching over 14,000 on the Dow.
The reason that stock prices have advanced over the past few years has largely been because of the unprecedented explosion of liquidity around the world. The US Federal Reserve has been expanding the money supply at a breakneck pace in an effort to prop up the US economy.
However, now it appears that the party is over. Fears of a credit crunch created by the meltdown of the US sub prime loan home lending market are beginning to take their toll. Last week the stock market had its worse week in four years with a quick loss of nearly eight hundred points on the Dow.
It is as if the risk of lending money to people who will have trouble repaying the loans has suddenly been discovered by financial institutions and investors. Imagine that.
One of the most famous movies about the culture of Wall Street was made in 1987. The movie stared Michael Douglas who give one of the most memorable movie speeches of all time.
While made 20 years ago the message in the Wall Street speech does not seem at all dated. In fact after Enron and the like it seems more relevant than ever.
Watch the video. Michael Douglas does a much better job of delivering the “Greed is Good” speech than I ever could.
The stock markets of the world have become more sophisticated over the years and certainly much larger in terms of daily volume of the value of shares traded and market caps of the companies being traded.
One thing that has not changed is the army of stock market pimps who encourage investors to buy, buy, buy, no matter what the condition of the market.
Some of the pimps come in the form of stock brokers and stock brokerage firms who are naturally eager to expand their client base and sales volume. To them it is always a great time to buy stocks.
Then there are the cleverly positioned “analysis” who never analyst a stock that they don’t like. They are usually employed by firms that make their money by selling stocks so their analysis of stocks is usually a bit biased.
In recent years TV talking heads have entered the stock pimping game. It still amazes me that some of these folks command large numbers of loyal viewers who think that they are getting “inside” information right from the source. With millions of viewers getting the same planted information at the same time it may well be that the information is market moving information but not in the way the “TV investors” think.
Sir John Templeton rates right up there with Warren Buffet as one of the all time great stock market investors.
A few notable quotes from John Templeton are:
“Rejecting technical analysis as a method for investing, Templeton says, “You must be a fundamentalist to be really successful in the market.”
“Invest at the point of maximum pessimism.”
“If you want to have a better performance than the crowd, you must do things differently from the crowd.”
When asked about living and working in the Bahamas during his years of management of the Templeton Group, Templeton replied, “I’ve found my results for investment clients were far better here than when I had my office in 30 Rockefeller Plaza. When you’re in Manhattan, it’s much more difficult to go opposite the crowd.”
John Templeton was born into a poor Tennessee family. He attended Yale University on a scholarship and graduated at the top of his class from Yale University in 1934 with a degree in economics. He went to Oxford in England as a Rhodes Scholar. He obtained a M.A. in law in 1936.
