This is one of Dave Taber's postcards. But instead of being the usual demented travel-log, this time I'm writing about a virtual space. Wall Street. Which is now not only Main Street, but has invaded our homes as well. CNBC and Bloomberg are now fixtures of our news feeds, alongside CNN. Tickers stream on our home computer displays. So this postcard is about the collective nausea that has developed about investing. A lot of people are justifiably torqued for a simple reason: Wall Street has proven itself to be a worse gamble than Vegas, and crookeder too. At least with Vegas, you get a known loss percentage. Thanks to Monte Carlo routines (yep, this branch of math is actually called that), you can know in advance how fast you're going to lose your money. When you hear "the loosest slots,*" you can know that on average you'll lose 2% of your wager. In Wall Street, though -- no matter when you ask them -- the "advisors" will tell you that the market is fairly valued, or even cheap. Since there's no market for bad news, they'll tell you about appreciation potential. To say that the market is fairly valued today is preposterous, even though it has fallen by somewhere between 40 and 80%, depending on how you measure it. Did you know that right now, the S&P 500 is still trading for 32 times trailing earnings? More importantly, did you know that *the historical norm* is 17 and that a truly low P/E ratio is 7? Extrapolate this to the DowJones, and you get a number below 2000. Yet you'll be receiving advise from your financial "advisor" that now's the time to buy. Now is *always* the right time to buy, if you listen to a salesman. Before you do, go look at the advice given in the spring of 2000, when the sales pitches were even more fevered. One of my favorites was a hi-tech analyst (and this was a reputable one) who wrote, "all of the stocks we monitor have exceeded our target price; but we see no reason not to raise all the targets again." This guy got a great bonus. The darlings of Wall Street hype - name your favorites from three years ago - are down somewhere between 60% (Microsoft: BUY!!!) and 99.9% (Worldcom! Enron! I2! Inktomi! Broadvision!). Wall Street isn't going to recover for a long time to come because it has blown trust. Lawsuits have documented that Merrill (among others) told you and me to load up on stocks that they advised their Important Clients to dump as fast as possible. I personally didn't buy any of this dreck, but thousands of individuals swallowed whole...on issues that the bankers knew were "turkeys, pieces of shit." And the bright guys now say, "who knew it was a bubble? Nobody saw it." If you were Important, you *were* told to get out in time. Important customers also got tax-evasion vehicles offered only to those with portfolios above $5M, and even better ones offered only to clients with an order of magnitude more assets. But for 99% of us, the game wasn't just rigged -- it was designed to make us the Greater Fool. Is there any reason for you to trust Wall Street anytime soon? This is the law of deferred gravity, and in one way or another all of society pays. Even if you didn't invest, you suffer from budgetary hemorrhage in corporations and governments. It's fun to hear the big I-bankers now say, "we want you to maintain perspective and balance over a reasonable investment horizon of 3 to 5 years." This translates into, "the market is headed south." Understand their lingo: "hold" means "sell immediately" and "long term buy" means "sell as soon as it recovers a bit." The richest part of the irony is Wall Street's sanctimony regarding corporate malfeasance. There's no question that some slimebag CEOs are guilty, but who goaded them on? Who gave them overwhelming incentives to inflate their earnings and cook the books? Who game them standing ovations at investors' conferences? Money is not the root of all evil. But we can do a lot to root out the worst behavior by investing in reasonable businesses with growth that does not pretend to defy gravity. _______________________ *every quoted item in this postcard is a direct quotation. I haven't bothered to track the sources: they're all on the internet. David O. Taber DOTnet Consulting, Inc. www.D-O-Tnet.com 555 Bryant Street, Suite 789 Palo Alto, CA 94301 USA voice: +1-650-326-2626 (direct) best times to call: 8 AM or 7 PM PST page: mailto:5105024055@mobile.att.net (message <100 characters!!) mail: mailto:DOT@D-O-Tnet.com ICQ: 138661538 MSN-IM: DOTnet Y! davidotaber AIM: DOTnetConsulting best times to instant message: any time I show up "on line"