Don’t give me that crap about “buying opportunity,” either. It was a great buying opportunity a year ago, too.
The problem is I used up all my $ on the last 4 buying opportunities.
NASDAQ down 70%. Jeezum Pete!
You would think with something like 30 million subscribers paying $21.99 a month, and with the LOTR property and 2 sequels bought and paid for creating a practically guarranteed multibillion dollar property, that AOL would going down like a two dollar whore, but no!
Not sure if you want to just rant or share views on the market. I stayed out of the US bull market and therefore didn’t get hammered on the downturn. However, I have been burned buying markets that fell substantially, only to watch 'em keep going straight down. And, I went through several boom and bust cycles in Asia from the vantage point of the institutional sales desk as well as PA.
Owing to globalization, my Chinese telecom stocks get hammered every time the US has a hiccup when there should be zero correlation. Bastards.
Next week should be interesting, Dow and the Daq are rubbing around 9k and 1350 respectively. Several “technical” analysts have targeted those levels as sorta a “fair value” after the way over bought “irrational exuberance” of the previous administrations “ending of the business cycle.”
Friday’s an abbreviated session, not much to be said unless there’s very high trade volume with violent price moves but if it starts to look like money’s flowing into the market next week I just might get off the sideline.
On the other hand if next week starts to look like a dump and it stays this hot in the mid west I might just go wind surfing.
The current valuations of the stock market are still very high despite the recent downturn. Take a look at the 25-year history of the Price/Earnings multiples of the S&P 500 courtesy of Barra.com.
And since a lot of those earnings are probably the result of some accounting bullshit, the real P/E could be considerably higher.
As one pundit said, ‘No one was wailing and gnashing teeth when the stocks were on the upswing’.
Gotta agree. I think it’s just on a downspin now and will eventually turn up. Just hold your stocks. If they go outa biz then at least you have a deduction for that year.
Personally I think the ‘old way’ was a lot better. People invested in companies and did not depend on the stock price rising. It usually did, but the dividends and reinvestment resulted in you owning more stock, and made you feel as it you’re part of the company, not just an opportunist. Today, many companies do not even pay dividends. Myself I own Occidental (OXY) (yeah, just like Al Gore only not as much ) and Coke (KO) both of which pay dividends, and feel very much a part of thes companies. I do not own a lot, but I’m involved in the dividend reinvestment and also contribute on a monthly basis, so my share in the companies is growing.
Personally I feel the NASDAQ style of trading is really a very bad way to go. Once the stock is sold in an IPO, the company is pretty much out of it. They’ve got their money for whatever they want to do with it (less of course the brokers fee) and the stock price only reflects what others think of the value of the company.
Last week, my husband (the stock broker) had a client request that he put all his money in a mayonnaise jar until further notice. And he wasn’t entirely kidding.
Last year at this time we set up 529 accounts for our daughters. The good news is that it seems I’ll be spared those campus visits…
cynic makes a good point about the P/E historical context. My father - a pretty sharp stock market investor over the years - told me a few months back that he expected a severe downturn in the market, for this very reason. His point was that people kept expecting the market to turn, which in itself propped prices up somewhat. But as the market failed to recover, people would gradually come to realize that this was a futile hope - they would, in turn, bail out, sending the market even lower. Only when it reached a point at which income supported current prices would this cycle be broken.
OTOH, it should be pointed out that P/E cannot be calculated in a vacuum - it must be weighed against inflation and interest rates. IOW, the return on stocks has to be looked at in the context of a comparison to alternative forms of investment, for which interest rates constitute something of a benchmark. It happens that interest rates are unusually low by historical standards, which gives some justification to higher P/E levels.
As the economy recovers, one would expect interest rates to rise again, but P/E rates would also be expected to decline, with the accompanying rising profits.
Of course, it should always be kept in mind that if and when the broader market recovers, there is no guarantee that any individual stock will recover. Many never will.
On a board dedicated to fighting ignorance, I do have to chime in here and say that technical ¡°analysis¡± is a pure crock of shit. You might as well look at tea leaves or goat entrails to forecast the stock market. At best, and usually in a bull market, technical ¡°analysis¡± can be a useful short term indicator. Especially if a large proportion of market participants are watching those same indicators then they can become self-fulfilling prophecies. H
In a bear market, forget it. Unlike most US investors, I have been through several bear markets (Japan since 1990, Asia in 1994, Asia in 1997), I am of the opinion that the US equity markets are still seriously overvalued as shown by Cynic. IMHO, it’s a fallacy to look at how far a stock/market has dropped, because based on historical behavior, that is irrelevant as to whether a company is fundamentally attractive. I¡¯ve been long and wrong more than once, and definitely paid some expensive tuition for this lesson.
Took part in a international hedge fund/institutional investor round table last November here in Shanghai. The ¡°consensus¡± view that came out of the round table, was that the best case scenario, the US equity market would go sideways in a range for about 2 more years until earnings increased to the point that fundamental indicators became a “bargain” or at least more in line with historical trends. If you can ¡°buy low sell high¡± within that range, then you would have quite good performance. But you have to have the discipline to get out when everything is looking rosy and the market is climbing. Very much a trading market. The worst case being that the markets would fall quite sharply until the basic fundamentals were in line with historic trends. If you¡¯re a mutual fund investor, just stay in cash and buy in sometime in the next year or two when all is looking bleak.
The caveat was that there would be no major corporate failures. Obviously, we’ve had Enron and now a slew of corporates admit to false accounting practice since then. That greatly increases the risk profile. Yes, by the way, GE is/was pretty highly leveraged, and the rating agencies/market is demanding that they unlever a certain extent. No idea if it¡¯s oversold but certainly sold down for a reason.
Bull market experts always forget that bear markets can persist for much longer than anyone thinks is ¡°reasonable.¡± Just look at Japan.
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) and Coke (KO) both of which pay dividends, and feel very much a part of thes companies. I do not own a lot, but I’m involved in the dividend reinvestment and also contribute on a monthly basis, so my share in the companies is growing.