Never Buy Stocks Says Paul Farrell

Paul Farrell reveals that we would have been 11 times richer if we bought 25 year zero coupon U.S. Treasury bonds in 1981 instead of stocks, an interesting and eye opening read.-Lou

Best strategy for long bear market 2010-2020
Bonds beat stocks by factor of 11 from 1981 to 2009, but can it continue?

Paul B. Farrell

ARROYO GRANDE, Calif. (MarketWatch) -- Never buy stocks. Never. Unless, of course, you love gambling (and losing) at the Wall Street casino. Or you don't mind making payments on your broker's BMW. Or you just joined a monastery and just took a vow of poverty.
Otherwise, don't buy. Stocks are losers.

At least that's the only rational investment strategy you'll come away with after reading economist and long-time Forbes columnist Gary Shilling's analysis of the miserable performance of stocks during Wall Street's recent bull/bear cycles, beginning with the election of President Reagan in the early 1980s.

And it gets worse when you project into the bear market predicted for the next decade, till 2020. Ergo, more tough times ahead for investors, possibly a sequel to the painful sideways bear of 1968-1982.
So I ask you: Knowing the history, why would anyone in their right mind invest in stocks? You'd be a fool, right?

Yes. But join the club. We are a nation of "those who cannot learn from history," as the philosopher George Santayana once warned, so we "are doomed to repeat it." Statistics prove that year after year America's 95 million investors are indeed clueless fools, easily conned into buying stocks by what BusinessWeek once called the "Wall Street Hype Machine."

.....Bonds beat stocks by factor of 11 times from 1981 to 2009
Yes, and you'd have been 11 times richer. Listen closely to Shilling's analysis of the past 28 years. In his Insight newsletter he compares the performance of the S&P 500 stock index to the bond market. First he focuses on his "all-time favorite graph" comparing "the results from investing $100 in a 25-year zero-coupon Treasury bond at its yield high (and price low) in October 1981, and rolling it into another 25-year Treasury annually to maintain that 25-year maturity."

His bottom line: "On March 31, 2009, that $100 was worth $16,656 with a compound annual return of 20.4%. In contrast, $100 invested in the S&P 500 at its low in July 1982 was worth $1,502 last month for a 10.7% annual return including dividend reinvestment. So Treasurys outperformed stocks by 11.1 times."

Read More:
http://www.marketwatch.com/News/Story/well-need-more-bear-market-beating-bonds/story.aspx?guid=%7BD9A93369%2D730F%2D4670%2DBD61%2DCCA853F57C8B%7D