Author: A.T.

APRs

“I just read your column on APR’s and I wanted to make a couple comments. If one is talking about savings accounts or CD’s, then the method of compounding might be the main thing that affects the APR, although as computers have taken over the banking industry I don’t know if anyone still compounds quarterly, or even monthly. But in my experience, when one is talking about home loans, the APR is mainly affected by the points and/or fees on the loan. There exist no-point, no-fee loans where the APR is the same as the nominal rate, but the APR for the other loans takes into account these points or fees.” – Greg Buliavac

A.T.: When I think APRs, I think savings accounts. But you’re right. Thanks, Greg.

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DUMB LUCK

“Speaking of dumb luck (as in forgetting about GTC Limit orders), the following has happened to me twice: I went into the trade screen of my online broker and instructed them to trade 100 shares of a stock I was holding so that I could realize a tidy profit. Upon checking the status of the trade later I realized that I hadn’t indicated the trade was a sell, and therefore the default of ‘BUY’ was executed. Instead of selling 100 shares, I now owned 200 shares. Fortunately both times the stock has risen, so that when I remedied my mistake I actually made a few hundred extra. Whew! Counting my blessings in NC. (Don’t use my name in column please, too embarrassing. ;-)” – A.T.: For a few hundred extra, I agreed not to use his name.

FINDING GREAT CD RATES

“The two best money market and CD rate scanning services I’ve found so far are www.bankcd.com and www.bankrate.com. I’m now earning .4% more with an FDIC insured bank I found through www.bankcd.com (5.85% compared to 5.39%, $25,000 minimum deposit and a limit of 3 checks a month) than I was with my … [broker’s – a broker other than the one that sponsors this comment] alleged premium money market mutual fund ‘the best in the country.'” – Bill Nagler

Adds Alan Light: “Another useful site is www.banx.com/wsj/savcd/savebox.htm. Which, unlike bankcd.com, is completely free.”

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FINDING OUT-OF-PRINT BOOKS

“If you are looking for a really great book search engine, try www.mxbf.com. It will catalogue results from Advanced Book Exchange, Powell’s, Bibliofind, Amazon, Interloc, and Bibliocity … all in one swell foop! You can ask it to give you 10 books per site, 25 books per site, or more … and specify price ranges.” – Rick Geyerman

A.T.: A swell foop indeed. And as if that weren’t testimony enough:

“Amazon just got back to me about your book, Getting By On $100,000 a Year and Other Sad Tales, and after a full month, they offered it to me for $80. Now, I like some of your work, but not at $80. I declined, then found MX Bookfinder (www.mxbf.com). In 30 seconds, they found 4 bookstores with 8 copies priced $10 – $20 plus shipping. They aren’t quite as easy to use as amazon (I have to snail-mail a check to the dealer), but much faster and cheaper overall. MX Bookfinder allows you to put in requests for books they cannot immediately locate, so I put in the out-of-print anesthesia text that Amazon has not yet been able to locate. You have a point about Amazon’s cutthroat competition and the likelihood of an after-tax profit of $250 million.” – Charlie McDannald

So I get a lot of brokerage statements at the beginning of each month. There’s the one on which the commissions are all about $8. There’s the one on which the commissions are all about $48. There’s the one I don’t use much — a discounter but not a deep discounter — where the commissions are typically about $120.

All these statements are easy to read and review.

And then there are the ones I get from my full-service broker, at which the commissions are typically $150 or $250 for trades I could do just as well for $8, but I am Godfather to my broker’s kids. And for more than a year now, these statements — to save paper? to drive us nuts? — have been printed as follows: Page 1 comes first, then page 2, upside down on the back of page 1, then page 3 like page 1, then page 4 on the back of page 3 and upside down. And so on. The pages have holes punched in them at the top, though I can never recall being sent a full-service, $200-a-trade binder, and I guess the idea is to flip through the pages not from right to left, as one would flip through a book, but as you would page through a wall calendar — paging up rather than to the left.

But let me tell you: It’s incredibly annoying.

And don’t I feel better for getting this off my chest?

If only Seinfeld weren’t going off the air, he could do virtually an entire episode on this all-important theme.

From Jim Strickland: “I’m confused about the stock market. The most simplistic explanation I’ve ever heard for what the stock market is, is that it is a way for you to own parts of companies. [A.T.: A perfectly good explanation.]

“In the old days, before 1987, hardly anyone invested in the market or cared about it much, so there was always this finite, slowly growing, amount of money being invested. This was perhaps the reason stock prices also rose ‘slowly,’ 10% a year or so. [A.T.: Stock prices tended to rise 6% or 7%, plus there was a thing called dividends that added another 3% or 4%, for a total of 9% or 10%.]

“But since 1987 a number of things have changed.

1. The baby boomers are saving like crazy. [A.T.: No, but we should be.]

2. 401 K plans are hot because NO ONE trusts a company to give you a pension till your 100. [A.T.: And because where an employer puts up 25 or 50 cents for each dollar you save, NOT to save is like spurning FREE MONEY.]

3. The tax code has been tightened up so there aren’t many loopholes for people to put their money in, so it goes to the market.

4. The whole world trusts the U.S. economy more than any other, even their own, so that money is coming over.

5. Inflation is way down so bonds aren’t very fun anymore. [A.T.: Low inflation isn’t what makes bonds no fun. Real interest rates – the rate you get after inflation – are higher than they were when inflation was high. But bond interest is heavily taxed, and how can they compete for fun with stocks that go up 25% a year? They will be much more fun in a year stocks go down 25%.]

“So if you look at all of the above points, there is TONS more money coming into the market, trying to buy the same amount of shares, companies, etc. I know that’s not exactly true but for arguments sake it’s true enough. So all the money in the world chasing the same amount of stocks will of course drive the prices higher constantly, no matter what else happens. This is what I believe is happening to stock prices.

“It seems to me that one of two things can happen. Either …

1. This is the way things are going to be from now on and it’s ok, don’t worry about it. Or …

2. This is like what happened to Japan and the stocks are going to fall like crazy sometime, half the ‘wealth’ of individuals is going to ‘go away’ and we’re all in for a really lousy time.

“Are there any other ways to use investment money besides putting it into stocks and carving the same pie into smaller pieces?”

A.T.: I think you’re not a bit confused, Jim [my annoying bracketed comments notwithstanding].

As high as our market has gotten, its overvaluation (if I’m right that it’s overvalued) is nothing like Japan at its peak, and I’m hoping it won’t be. But you’re right: If people just keep bidding up prices irrespective of value, prices will keep going up irrespective of value – but not forever.

Other places for money? You bet. I’m not recommending these, just listing them:

1. Paying down debt. Want to suck a trillion dollars in demand out of the stock market? It’s as simple as people deciding to take profits and use them to pay down their mortgages. (Even just paying off car loans would suck a little liquidity out of the market, and an investor who does that earns 10% risk-free, tax-free if his Buick came with a 10% loan.)

2. Real estate. Suck out some more demand buying a retirement condo or bidding up the price of land. If you had a $30 million profit in some high-tech stock, what would you care whether you paid $1 million or $5 million for your Caribbean island? For your view of the Tetons?

3. Bonds and cash. The Japanese have invested a ton of their own money in U.S. Treasury securities. At some point, American investors might decide to bid up their prices and buy them back. Or just to put more money into safe bank accounts.

4. Overseas. Lots of markets are high, but some are not. Some people may decide to switch a bit of their assets from the U.S. to Asia or others areas.

5. New investments. One of the great things about this low-interest, liquid investment environment is that it leads to financing tremendous innovation. We’re building a new economy, here and abroad – so one place the new dollars can flow isn’t into existing shares of existing companies, but into new shares of new companies. There’s a limit to how much can be wisely invested, but a growing world economy will definitely absorb investment funds. What will it cost to bring the rest of the world up to US/European standards of living – and to do it in planet-friendly ways? There is a tremendous need for capital, if only the economies of the world can figure out how to organize it all with reasonable good sense.

So, yes, there are places those trillions of baby boom dollars could go other than the high-multiple U.S. stocks.

(One other place: the doggy stocks that, even in this market, are too small or dull or unappreciated to have gotten swept up with the rest. Forget the dogs of the Dow. You should see the dogs of my Keogh.)

Sure it’s a monopoly. But is Microsoft a pyramid scheme, too?

From Jonathan: “What do you think about the article that appeared on the cover of the Financial Times recently that claimed that if the value stock option granted to employees were accounted for as an expense, then some high-flyers, like Microsoft, would have shown a net loss in 1996? Is Microsoft some kind of big pyramid scheme where the company maintains itself by paying its talented engineers in stock options (thereby diluting all the other shareholders)? The scheme works as long as the share price goes up, but as soon as people think it’s leveling off, the price could collapse.

“Full disclosure: in 1990 I was offered the option to acquire 2,300 shares (pre-splits) of Microsoft at the then present price. This was part of a job offer. I refused, because I was suspicious. When I interviewed at Microsoft with about six people during one day, they each pointed out that as a Microsoft employee, you get FREE soft drinks on the job — all the Cokes that you want. There was a big spray-painted banner hanging in the lobby, ‘Ship or Die.’ And there were no women working there, except for the recruiters, who were all exceptionally cute. Lastly, a young Microsoft engineer, responsible for the Macintosh version of Excel, took me to dinner at the only fancy Jewish restaurant in Seattle. I am Jewish, as anyone can tell from my last name, but I never said anything about it. Everything seemed so perfectly orchestrated. The hairs stood up on the back of my neck, and I bolted.”
A.T.: What do I think? The first thing I think, not surprisingly, is that this decision cost Jonathan $48 billion or something. Poor guy! It ranks right up there with my never having bought Berkshire Hathaway.

What I further think is that there’s definitely something to this. On the one hand, Microsoft is no pyramid scheme: It sells products the world clearly demands. (In a pyramid scheme, the big money isn’t made selling products but rather in selling the “right” to sell those products, and getting eight or ten people under you to sell eight or ten people under them the right to sell eight or ten people under them … like a chain letter.) Yet at some point, the cost of labor at MSFT is likely to rise, and the more exciting entrepreneurial opportunities will be at smaller firms. Today’s 18-hour-a-day men and women will take their $15 million and open pottery shops by the sea. Tomorrow’s talent will be harder to acquire and motivate. They may have to be paid with actual money rather than the prospect of stock options that climb to the moon. Paying with more competitive salaries will cause a drag on earnings which will cause a drag on the stock which will make stock-option compensation all the less a substitute for competitive wages. And some folks may decide it’s enough to work 12 hours a day, and others may decide they should take their talents to smaller enterprises or start their own.

But none of this may happen for quite a while, because Microsoft is such a powerhouse company, with lots of potential still to grow.

And this is true of lots of today’s high-tech companies.

And it’s not just employees who are being paid with the prospect of future stock price gains — it’s investors. Forget dividends. Forget big salaries. So long as the stock keeps rising, investors and employees will be happy.

And basically, it’s great: People in the high-tech world are working like crazy (and making fantastic technological progress), both because of the excitement of what they’re doing and because of those stock options … investors are shoveling in all the needed capital and demanding not a dime in return. The cost of labor and capital are both low.

Someday, employees and investors will want cash. That could well lead to a vicious cycle that disappoints a lot of employees and shareholders. But in the meantime, we’re remaking the world.

Some of you have read the background of this already (hint, hint), about the fellow suing me for $4,000-plus for locking him out of his apartment and stealing his brand new TV and other valuable furniture. I’ve never met the man, whom I have called “Mr. B,” but if he’s correct — if we really did lock him out of his apartment, I would surely want to make it right with him.

Instead, I am convinced that my property manager is telling the truth. He says that when things weren’t working out, he offered Mr. B $150 or $200 to give us back the keys (thus saving us the cost and time of the eviction) … that Mr. B agreed … and that, offered a chance to take his stuff (most of which had been assembled from curbside cast-offs, including the TV that had no picture tube), he said he didn’t want any of that junk — and left.

Not a word of complaint until about nine months later when I was sued by Legal Services of Greater Miami. That was in December 1996.

It makes me a bit nuts to recount all the time and effort (and legal bills) that have gone into this so far. And yet if we just settle, what message does that send? “Just go to Legal Services and, worst case, you strike out. But it’s free (the taxpayer pays), and since you’re unemployed, whatever little time it takes you is not much of an inconvenience.”

I happen to support the concept of Legal Aid for the poor, but I also support the concept of calling someone before you file a lawsuit and the concept of “good judgment” when it comes to weighing which cases merit representation.

Anyway, after a time we got an offer asking us to settle for $1,250. And then it just sort of faded away. We figured Mr. B had lost interest.

But no, it’s back. Having already been deposed ourselves ages ago, we were now to take Mr. B’s deposition April 20, and so my lawyer prepared for it, and promptly at 9 a.m., he and my property manager and the court reporter and the lawyer for Legal Services were there waiting for Mr. B. When by 9:40 he hadn’t shown up, someone called his car service (he is eligible for free transportation), and somehow we got word that he hadn’t been feeling well and wasn’t coming, and we’d have to reschedule. Which we are now doing.

This cost Mr. B nothing. Not even a quarter to call and say he couldn’t come. It cost me my lawyer’s time, my property manager’s time, and the court reporter’s time.

Meanwhile, we have gotten a new offer to settle, this time for $900, under a statute I think actually makes a lot of sense, designed to encourage settlements. It says we don’t have to pay the proposed $900; but if this proceeds to trial and he actually is awarded at least that much (or maybe 75% that much, I can’t recall), I’m then liable, also, for Mr. B’s legal fees from the time of this offer on. In other words, I’d get a bill from Legal Services for representing Mr. B at trial. (There’s some question whether Legal Services actually filed this properly. But if they did, that’s the way it would work.)

It’s not a bad law, because if it were a case where I should have salted the ice on my stairs, and I’m just stalling … or I disagree about the degree of injury or something … well, this makes me think hard about stalling any longer.

But it isn’t that kind of case. (Fortunately, the stairs rarely ice up in Miami.) Mr. B paid us a few hundred bucks to live in our apartment for a few months. He proved an undesirable tenant from our point of view (believe me, we hate to lose even mediocre tenants); we offered him some cash to go; and he did. At least that’s what my property manager insists, and my big-hearted property manager is anything but tough on the tenants.

So we’ve said no to the $900, and that’s where it now stands. The net effect of Legal Services’ efforts in this case has been twofold:

• to drain what will be at least $5,000 from the “good guys” — money I initially offered to donate to the homeless organization of Legal Aid’s choice, so long as not a dime of it went to Mr. B;

• to increase homelessness.

Why has Legal Services’ actions increased homelessness? Because we’re now even warier than before about renting to someone without first and last month’s rent and decent references. Which leaves out every homeless or about-to-be-homeless person in Miami. We still try to help when we can but are now more likely than before to leave 15 or 20 apartments vacant rather than risk tenants who will pay $100 to move in and then destroy the apartment before finally being evicted, a three-month process that costs a minimum of $375 plus the lost rent and the damage.

Which is why our first attempt, before starting eviction, is to work out something friendly and voluntary as we did with Mr. B.

But Legal Services has taught us it’s even more expensive to give people a chance than we thought.

Perversely, one good way to help the homeless would be to enact laws making it easier to evict people in certain circumstances. Localities should pass ordinances that allow for a “starter lease” or some such. In English, Spanish and Creole — or whatever were appropriate in that locale — it would very clearly explain that, in return for being allowed to move into a $20,000 piece of property with little or no financial security and insufficient references, the landlord would be entitled to an accelerated eviction process if it didn’t work out. This would make it easier for landlords to take chances on people down on their luck or of questionable background, while leaving undisturbed the protections for ordinary tenants. And for those down on their luck who gradually were able to build a decent track record and/or a security deposit, the accelerated-eviction provision of the lease could, under certain conditions, automatically expire.

Don’t vote against funding for Legal Services; administered sensibly, it’s a program a compassionate society should have. But the people involved in this particular case have demonstrated poor judgment from day one.

Stay tuned.

From Matvey Shindel: “I have just received a proxy statement from a large corporation whose board of directors wants to triple the [authorized] number of [shares of] common stock. They want to have these shares ‘just in case’ for all sorts of things, from the employee savings plan to business expansion. I own a few shares of this company, and I am wondering whether issuing billions of additional shares would reduce the value of existing shares. Could you please comment on this? Spasibo.”

As you know, the board is seeking your permission not to split the pie into more, thinner slices right now, but rather the authority to do so in the future. Whether doing so in the future reduces the value of the existing shares naturally will depend on what they do with any newly issued shares. At one extreme, imagine that for just 10,000 low-priced shares, they were able to acquire an oilfield that turned out to be worth $50 billion once a few wells were drilled. Wow! Now imagine that they used 100 million shares to acquire the same land, but the geologist who recommended it had become confused by a USA Today article noting that bottled water today sells for more than gasoline and so had recommended purchase of what turned out to be a rich field of subterranean water.

If you think the management is smart – as I assume you do, or you wouldn’t hold the shares – then let them do what they think will build value. They may not be smart, but they certainly wouldn’t purposely try to lower the value of your shares, because that would lower the value of their stock options. (Nye za shto.*)

*Note to non-Russian speakers: Ya tridsat’ lyet uzhe staralsa uchit rooskii yazik, i yeshchaw nye mogoo! (Which may or may not mean: “I have for thirty years already been trying to learn the Russian language, and still I can’t.”)

From Jeff Schwarz: “While researching home equity loans for my mom, I noticed that banks advertise percentage rates for the loan and a different, higher number, for the Annual Percentage Rate. What is that? And what’s the difference (please don’t answer ‘About half a percent.’).”

There are a lot of ways of calculating interest, especially as it can be compounded annually (8% on $1,000 is $80 interest) or quarterly ($82.43) or monthly ($83) or daily ($83.28) or even “continuously” ($83.29). And most financial institutions use a 360-day year, but some might want to use 365 days. And in the old days, there were even more games that could be played to keep you from understanding – and being able to meaningfully compare – interest rates, whether you were borrowing or putting money in a savings account.

The Truth in Lending Act changed all that. I forget exactly what the rules are for calculating the Annual Percentage Rate, but the nice thing is: That’s not the point. The point is that you can rest assured it’s calculated the same way by everyone, so that you can confidently compare the APR.

Not clear on compounding? Well, the first part is easy: 8% compounded annually is clearly $80 on $1,000. But quarterly means you’d get $20 the first quarter and then earn 8% on $1,020 – not just $1,000 – in the second quarter, and thus earn $20.40. So the third quarter you’re earning interest on $1,040.40 – $20.81. Get it? And daily compounding gives you (or the lender) even a little more juice.

And while we’re on the general topic:

From Phil Martino: “I read one of your articles many years ago and have never forgotten it. It was the one about if you borrowed $1000 from a friend and paid him back at $100/month for 12 months, how much interest did you pay? I have asked dozens of people over the years that question. Like you said, a lot of intelligent people say 20%. It is a lesson I’ll remember for life. Thanks.”

Not quite clear why this has proved particularly helpful to Phil, except that it may have won him some barroom bets. The answer of course (drinks on me!) is that if you paid the full $1200 all at once at the end of the loan – returning the $1,000 and paying $200 interest for the right to have used $1,000 for a year – then you did indeed pay 20% interest. But the fact is, you borrowed $1,000 for just one month. Then, having repaid $100 (some of which was interest, some principle), you borrowed less than $1,000 – and less still each month that followed. So you paid $200 to borrow, on average, less than $1,000 for the year. In this case, the interest rate works out to about 35%.

Hard to calculate on your fingers and toes? Indeed. And that’s why the Truth in Lending Act and APR are so useful.

“Let me tell you about my dumb luck on Wall Street last summer,” writes one of your number by the name of Uvarov. “When [Ralph Lauren’s] Polo went public, I put in a stop order at $27, for 1,000 shares. [A.T.: He means a limit order, not a stop order.] If I couldn’t get the stock for $27 or less, I didn’t want it. I was going for a quick in-and-out IPO profit. Reckless, but I’d seen three other recent IPO’s I’d passed up…go uppppp.

“Well, after the favored clients at … [a broker other than the one that sponsors this comment] got the stock, it went to everyone else for more than $27. I thought, Oh, well, I didn’t get it for $27 or less. Such is life. And I thought that was that. What I didn’t realize was I had not put a deadline on my order!!!! [A.T.: He means he didn’t place a day order; he accidentally made it “good-til-canceled.”] And if you want to know what panic looks like, you should have seen me when I opened a statement from … [a broker other than the one that sponsors this comment] a week or two later stating I had bought a thousand shares of Polo at $27!!!!!!!! I meant for that order to be in only for the day of the IPO!!!! I thought that was understood!!!! And, of course, the reason I got Polo stock for $27 now was because the stock was going doowwwnnn. The statement was for a trade two days before. So I threw open my Wall Street Journal to see what Polo stock was trading for the day before. I expected to see it trading for $20, or something terrible … losing thousands of dollars through an accident – an oversight!!! But the stock was trading at $28!!!! But was it trading at $28 that day??? I called … [a broker other than the one that sponsors this comment]. It was trading at $28. (Whew!) I organized my information and called … [a broker other than the one that sponsors this comment] back a few minutes later and said I wanted to sell my 1,000 shares. The friendly girl said, ‘Okay, that’s 1,000 shares at $28 1/8.’ Those few minutes of organizing my info. meant over $100 difference in my favor. So I made a nice little profit for less than a week of holding the stock, all from a flub.

“Anyway, that is my Wall Street Adventure. Forrest Gump couldn’t have had dumber luck.”

A.T.: I’m thrilled for Uvarov and first to admit I’ve made a mistake or two in my own day. But I’m also worried for Uvarov, because he sounds as if he’s fairly new to all this. Buying an IPO the first day at way above the initial offering price just because IPOs seem to go up even more than that the first day – well, this obviously can work, and it’s obviously exciting, and the great thing about America is that you’re free to do it. And Uncle Sam is thrilled, because he’ll take a good chunk of the winnings if you do win, while strictly limiting any tax benefit if you lose.

But when I read this message, other than liking Uvarov immediately, the sense I had was, well, it’s just getting a little too easy.

From Paul Kroger: “I feel it may be misleading to compare P/E ratios today with historic levels. Current market P/E’s are often referred to with caution as being at ‘historically high levels.’ But, given an increasing number of people investing in stocks relative to historic levels, wouldn’t you expect this to occur? My impression is that the Conventional Wisdom has always attached a lot of risk to stocks, which kept many potential investors out of the game and handsomely rewarded those who dared play. Now we ‘Boomers’ have learned (or at least been led to believe) that the risk is short term, and that ‘in the long term stocks always provide the best return.’ All things being equal, as more investors buy into this idea (and there are a lot of us), wouldn’t you expect P/E’s to be bid up significantly from historic levels? Granted, P/E’s currently reflect an extremely optimistic outlook for earnings and are truly high by any measure. But I never hear anyone relate the increased number of equity investors to a general increase in market P/E’s.”

A.T.: I think you’ve asked a very good question.

The first point I might make is that in the second largest economy in the world, people save a lot more than we do here, relatively speaking, and they too face an aging population concerned about retirement – so their stock market must be booming, right? With all those savers shoveling in money? But the answer of course, as you know, is that the Japanese market is down 60% from its level nine years ago. (They’ve been saving, but not in Japanese stocks.)

But you’re right: So long as everyone believes stocks can only go up regardless of value … and that any dips will be shallow and short-lived … the market will keep going up, and any dips will be shallow and short-lived. P/Es can climb to the moon, at least for a while.

Still, think about what the P/E is. It’s the price you pay for a piece of the profit pie. If you buy a short-term Treasury these days, you pay $20 for $1 annual return. Totally safe. If you buy a stock at 20 times earnings, it’s the same deal – $1 of annual earnings – except you don’t actually get the dollar. You may get part of it as a dividend, but the rest will be reinvested on your behalf in hope of making the return itself – that annual dollar – grow.

In the old days, people walked around saying things like, “a bird in the hand” (by which they meant a dividend check that didn’t bounce) “is worth two in the bush” (by which they meant a share of accounting profits that are probably real but hard to spend when you get to the checkout counter at Costco).

Now of course we’re too smart to worry about dividends, which in taxable accounts must be shared with Uncle Sam; we just want stocks that go up.

Still, someone paying 28 times earnings for the average stock in the S&P 500 is saying: “Don’t give me $950 for every $10,000 I’ve saved up!” (e.g., the $950 one could earn by paying down his home equity loan) No, I’d rather have $357 (28 times $357 is $10,000). What’s more, don’t actually give me all that money, just maybe $150 or so. With the rest, do whatever you think is smartest.

Someone paying 50 times earnings for a growth stock is saying, “I’d rather earn 2% in a growing company than 9.5% by paying down my home equity loan.”

My guess is that, despite the good reasons one can marshal to pay 28 times earnings for some stocks, and even 50 times earnings for a few, the time will come when birds and hands and bushes reappear. If a recession ever surfaced, or even just the fear of one, appreciable numbers of investors might decide that 9.5% is better than sitting with stocks that pay little or nothing in dividends and could lose 10% or 30% in value (or possibly even more).

At which point, if fear reappears, as it periodically used to – be it this week or in the next century – stocks will lose 10% or 30% (or possibly even more) of their value.

And then the recession will end, greed will overtake fear, and stocks will begin climbing back.

Personally, I have no interest in accepting $200 or even $357 on each $10,000 I invest unless the circumstances are very special – as some are. I’d rather get $950 (9.5%) paying down my home equity loan. If fear ever reappeared, I’d be a more enthusiastic buyer.

So does this mean you should try to “time the market”? I suppose not – especially in a taxable account. “Everybody knows” that you can’t time the market and that missing just a few of the really great spurts in the market – which come at unpredictable times – robs you of much of the gain you might otherwise have had.

But all rules have exceptions, and when “everybody knows” something, their very knowing can make it no longer true.

Which is a very long-winded way of saying: Be careful.