Tuesday, March 03, 2009

Irrational Exuberance Revisited


Floyd Norris has a great article over on the New York Times--The Return to Irrational Exuberance. Obviously, it refers to Alan Greenspan's famous words. Too bad that Alan Greenspan didn't believe his own words.
”How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?”
Yikes.

Floyd's article is worth reading. He did remind me of one thing I learned about investing more than 25 years ago. Good stocks go up, and bad stocks go down. Good stocks go up more , and down less than bad stocks--in good and bad markets. Greenspan spokes his famous words about "irrational exuberance" on Dec. 5, 1996. Look how these ten stocks did since that day:

The winners:
  • Wal-Mart, up 282%
  • Exxon Mobil, up 180%
  • United Technologies, up 136%
  • I.B.M., up 130%
  • McDonald’s, up 120%

The losers:
  • General Motors, down 95%
  • Citigroup, down 89%
  • Bank of America, down 86%
  • Alcoa, down 63%
  • DuPont, down 63%
  • General Electric, down 52%
You should consider taking Floyd's feed. You can go to his site and read the comments to his article by following this link.
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Bob DeMarco is a citizen journalist, blogger, and Caregiver. In addition to being an experienced writer he taught at the University of Georgia , was an Asociate Director and Limited Partner at Bear Stearns, was CEO of IP Group, and is a mentor. Bob currently resides in Delray Beach, FL where he cares for his mother, Dorothy, who suffers from Alzheimer's disease. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. His content has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, BlogCritics, and a growing list of newspaper websites (15). Bob is actively seeking syndication and writing assignments.