Friday, May 27, 2016

Stock Market: It´s Quite Expensive To Be A Perma-Bear

(Drivebycuriosity) - The media love the perma-bears. On Marketwatch, Bloomberg, Business Insider and other media platforms you can read daily that some pundits recommend to sell stocks. Perma-bears like George Soros, hedge fund mogul Ray Dalio, doom & gloom pope Marc Faber, the economists from Societe General & Royal Bank of Scotland and many more have been claiming for years that the stock market is way too expensive and that stocks will have to fall deeply ( driveby ).

These perma-bears are all on the losing side. Since spring 2009 the S&P 500, the gauge for the US stock market, gained more than 200%. Stocks are close to an all-time high. That´s very frustrating for those who have been sitting on cash and almost interest-free bonds for years. It´s worse for those who, like Soros, who have been betting on dropping stock prices via put options ore short selling (borrowing stocks from the bank and selling them immediately in the hope to buy this papers back later for a lower price) (Soros). Even in the ten-years period from 2006, which includes the recession 2008, US stocks climbed about 60%.

In the long run stock market gains are the normal. According to a study of the University of New York  the US stock market (S&P 500) created an average return of about 10% p.a since 1928! (dividends reinvested investopedia). It is quite expensive to be a perma-bear!

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