Goldmans Sachs “Once in a Generation” to Buy Stocks Call – Three Years to Late?

This week The Wall Street Firm Goldman Sachs has issued a call for investors to buy stocks.   Goldman Sachs described this opportunity for investors in a paper that was released by the firm this week.

….The prospects for future returns in equities relative to bonds are as good as they have been in a generation….

The title of the Goldman Sachs Report is “The Long Good Buy;  The Case for Equities – I am enclosing a link to the report for readers who would like to read this below.  The report is 40 pages.

 

The Long Good Buy;  The Case for Equities

 

At Reliance, we do not dispute Goldman Sachs point of equities superior attraction versus bonds at this point in time – we actually have already commented about this on earlier articles such as Here and Here.

Where we do differ with Goldman Sachs is the timing of  their advice to the Investing public that this week is the “once in a generation call” to buy equities.

A much better time for Goldman Sachs to have issued this call to the investing pubic to buy stocks would have been March 21, 2009three years ago – when stocks were at “Once in a Generation lows”.

Let’s take a look at a chart of the major indices from March 2009 to today – we will look at the following Stock Market Indexes:

  • S&P 500
  • Nasdaq
  • Russel 2000 Small Caps
  • CRB Index (Commodities)
  • US Dollar (below – note the decline in the purchasing power of the Dollar)

 

(Click on Chart for Larger Image)

 

 

As readers can see – Goldman Sachs call that they issued this week that now is the “once in a generation” time to buy equities has come  after equities have risen over 80% – 100% higher in the past three years!  Below is another chart which shows the performance of the same indexes over the past  three years.

 

(Click on Chart for Larger Image)

 

 

One of the goals of “Investing” is to be buying asset classes when they are out of favor (and typically  at lows) and selling these asset classes when they are loved (which are typically as they are making new highs).

The timing of Goldman Sachs call this week in issuing the once in a generation buy call comes after the stock market indices are up significantly from the 2009 lows.  Furthermore, the market this week are significantly higher from their most recent lows from October 4, 2011 – when the S&P 500 was at 1,074.  Below is a chart of the S&P 500 that shows how far the S&P 500 has come from it’s recent low in October, 2011.

 

(Click on Chart for Larger Image)

 

 

History clearly demonstrates that buying an Investment or an Asset Class at their highs – or after an Investment or Asset Class has significantly increased in value – is not a prudent strategy for building wealth over a period of time.

At Reliance, our advice on the Goldman Sachs “once in a generation” call is the same advice we have for dealing with any of the Wall Street firms – and that advice is “Caveat Emptor”  -  which is the famous Latin saying that translates to “Let the buyer beware”.

 

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

  • Reliance Investment Management LLC is a Registered Investment Adviser in the State of Washington. The adviser may not transact business in states where it is not appropriately registered, excluded or exempted from registration. Individualized responses to persons that involve either the effecting of transaction in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption.
  • This communication reflects the opinions of Reliance Investment Management LLC and is being provided for informational purposes only and is not intended as a recommendation, an offer or solicitation for the purchase or sale of any security referenced herein or investment advice. It is being provided to you on the condition that it will not form the primary basis for any investment decision. Reliance Investment Management LLC and its affiliates may have positions (long or short), in securities or options on such securities referenced herein. The information contained herein is of the date referenced and Reliance Investment Management LLC does not undertake an obligation to update such information. Reliance Investment Management LLC has obtained all market prices, data and other information from sources believed to be reliable although its accuracy or completeness cannot be guaranteed. Such information is subject to change without notice. The securities mentioned herein may not be suitable for all investors.
Follow

Get every new post delivered to your Inbox.

Join 41 other followers

%d bloggers like this: