Bringing Down Bear Stearns is an essay that claims to tell the story of Bear Stearns last days. Some parts of it are a little dubious, like the repeated hints that Bear Stearns demise was all due to the work of some evil short sellers. Once you read the article all the way through, you get a sense of a how fragile Bear Stearn’s position was and it makes you doubt that anyone would have had to deliberately do it in.

Nonetheless, the article makes for a great read once you get past the rather slow beginning. Some of the anecdotes in the article will fill you will unholy glee such as when you read about the Bear Stearns traders grousing about the risk adverse nature of Warren Buffett. Other anecdotes will make you wonder how independent the Federal Reserve really is. One gets the impression that Paulson was calling a lot of the shots for the Fed.

A lot of people get antsy leaving their money in savings accounts. They act as if there is some kind of moral imperative to seek out higher returns. Just remember though, you would have done better leaving your money in a good savings account over the last 10 years then you would have done by investing that money in the stock market. From a comment on Calculated Risk from Average Joe……

10 years ago today the S&P500 was at 1157

Today it’s at 1263.

That my friends is a .87% return. If you add in dividends, you’re up to a 2.7% average annual return.

This is before we even get into the bubble years of 99 and 2000. The ten year window of positive returns in closing fast.

(Note: this is lump sum, all-in investing returns…not the horrendous dollar-cost-averaging returns you get by buying through the dotcom era and last summer as the stocks stayed significantly above the trendline for much longer than it was below during this decade)

Never invest any money in the stock market that you think you will need in the foreseeable future. And never invest in anything that you don’t understand for yourself. If you can’t explain why you think a stock might have a good return using actual numbers, don’t buy.

Now that the stock market has officially turned into a bear market, a lot of people are starting to get excited. But that is premature. There will be no real excitement as long at the US government can sell bonds at will without effecting the interest rates. As Brad Setser reminds us….

The scale of growth in central bank foreign assets is hard to overstate, as is the extent to which central banks are now central to the financing of the US deficit. The US capital flows data significantly understate official purchases of US assets.