The Old Equity Rules No Longer Apply

Given the recent performance of global equities, this quote from Business Week seems on point:

At least 7 million shareholders have defected from the stock market. And now the institutions have been given the go-ahead to shift more of their money from stocks and bonds into other investments. Further, this “death of equity” can no longer be seen as something a stock market rally, however strong, will check. It has persisted for more than 10 years through market rallies, business cycles, recession, recoveries, and booms.

“It will take two or three years of confidence building, of testing, before the market can seriously act like it did earlier,” says William J. Fellner, a professor of Economics Advisers.

The problem is not merely that there are 7 million fewer shareholders. Younger investors, in particular, are avoiding stocks. Even if the economic climate could be made right again for equity investment, it would take another massive promotional campaign to bring people back into the market.

Says Alan B. Coleman, Dean of Southern Methodist University’s business school: “We have entered a new financial age. The old rules no longer apply.”

via The Compelling Case Against Stocks

Convinced? Well, then know that the above quote comes from the famous Business Week “Death of Equities” cover piece in 1979 that turned out to be so spectacularly wrong. While I”m not arguing the current circumstances are similar, it’s a good reminder that a little historical and epistemological humility isn’t a bad idea at times like this.


  1. Nice one, Paul – didn't see the hook at the end coming at all. Down for the count.

    • Paul Kedrosky says:

      Well, I can accept only so much credit as the heavy-lifting was done at the original source, but he caught me too.

  2. Hmm … "it would take another massive promotional campaign to bring people back into the market." – Couldn't one make an argument that's exactly what happened? That is, there WAS a massive promotional campaign with Reaganism, etc.