Muzie

Why SPY Could Be 20%-30% Higher by 2010

Funny to see how people are so gloomy that a 10% annual increase over 2 years now makes the headline of an article.

There is No Household Debt Crisis

It appears half of the commenters have written off the markets for good and appear to say that markets will not recover soon, if ever.

Then why oh why, I wonder, do you still read this website everyday? If the market is such a blatant lie, then you would be well advised to stop sinking more time into reading or commenting about it.

2009: Expecting a Massive Rally

Funny how everybody likes to talk about "sucker" rallies, implying they are the one in the know, yet almost 100% of the comments are bearish. So either I have found the world's best investors all gathered around this article or those who think they are way ahead of the curve aren't so.

The "suckers" by definition are supposed to be the majority, not the minority.

Bears are way over-confident in themselves. I would love nothing more than to have a "non-sucker" rally, just to remind the bears that nobody is omnipotent and humility in the markets is always a virtue.

Nine Reasons This Recession Is Welcome

"But the frugal are finishing first."

Huh, wrong. Having saved 50% of my salary for years, I fit in the "frugal profile".

There's only so many places to put saved money, and if one saves his money away one realizes he is only running in place if that money isn't invested.

Those who didn't save are way ahead. The majority of those who did save over the last decade have at some point put much of their savings in stocks.

Those who haven't saved know full well it if far better to lose 100% of somebody else's money than to lose 40% of your own.... As a "frugal" person I certainly do not feel I have the upper hand at this point.

Market Calls I Got Right - and Wrong - In 2008

Sir, I must say you very first statement contradicts your statement. If stocks were just pieces of paper, free to go up and down irrespective of the company, then indeed the bankruptcy of the company tied to the stock would have no effect on the "piece of paper" as you put it.

The very fact that the paper is worthless when the company is worthless implies the proxy relationship is alive and well.

> Have you ever purchased a stock that eventually went private
> at a price below what you paid for it? If you purchase Berkshire
> at $4000 a share and it is worth $5,000 a share based on intrinsic
> value, but Buffet wants to take it private at $3750, where do you
> stand now?

No, I never have, though I can't see what the price "I" paid for a stock has to do with the value of a company when it goes private. Though I have never heard of a company going private at a price below the CURRENT price of the stock, and in fact most companies going private will offer a significant premium on the current stock price. But you do make a good point: if you are the only one who "knows" the correct intrinsic value of a stock, then you may never profit from it as that information may never propagate to future buyers. It is unlikely that only one person would know about material information about a stock, and in fact once those buyers have committed themselves, it is usually very much in their interest to propagate what they knew so that new buyers may now see what wasn't widely known before (thus causing the price to rise).

There are no guarantees in markets - and I suspect in fact some dividend & bond buyers will sadly discover that bonds don't actually "guarantee" the stream of returns in the end.

> Where are all the investors that sold off as this market tanked and
> when are they going to get back in the market, that is the question.

That is a good question. As the value of the US dollar has risen, perhaps some have simply gone fully in cash? If these have truly given up on stocks, then they will not come back. If they are mostly "big boys" as you say (I think reality is a bit more in shades of grey than you imply), then it's these guys job to make a return no matter what, which to me implies it is in their own interest to come back sooner or later. Nobody wants to be the first to dip its toes back in, but being the last to come back is just as horrible for these managers.

On Dec 28 09:03 AM long_on_oil wrote:

> Stocks are pieces of paper and that is all they are. If a company
> goes bankrupt have you ever known a common stock holder that made
> a cent. Have you ever purchased a stock that eventually went private
> at a price below what you paid for it? If you purchase Berkshire
> at $4000 a share and it is worth $5,000 a share based on intrinsic
> value, but Buffet wants to take it private at $3750, where do you
> stand now? The lawyers will make a fortune but you will give up
> your shares at $3750. Share prices are set by the big boys and
> the little guys like us just hope to buy and sell at the right points.
>
> The only way you are guaranteed any kind of return on your investment
> at all is to buy stocks that pay dividends. The dividend places
> a bottom on the stock and you are protected to a point. Even dividends
> get cut so that does not guarantee you will make a gain.
> Companies with a long history of paying and increasing dividends
> are by far the best way to go for the average buy and hold investor.
> At least you are getting a known return on your investment. Any
> good site has a screener program which helps you find these stocks.
>
> These last 6 months have taught us that fundamentals have been thrown
> out the window. We all know stocks that are currently selling at
> 2 to 5 times next years earnings. With interest rates at 4% stocks
> have historically sold as high as 25X earnings (based on growth).
>
> Where are all the investors that sold off as this market tanked and
> when are they going to get back in the market, that is the question.

Market Calls I Got Right - and Wrong - In 2008

I understand your point - yet if the market is overvalued now (and it may very well be) the argument that the market was overvalued could have been made at anytime during the past 10 to 20 years. The only thing that has changed, in my humble opinion, is, well, that it is now very much in vogue that say you have just said.

I can't really respond to the rest of your comment as it appears heavily based on a subjective opinion that indicates that you believe you single-handedly know what millions of market participants (and millions of current non-participants) will do in the near-term future.

On Dec 27 04:13 PM freddyv wrote:

> "Yet, strong forces from the market crash deflate all stocks and
> your stock is still quoted 25% lower than your buy price as a result.
> Now, tell me, was your investment decision a good one or not?"

>
>
> The decision was NOT good if you should have known the market as
> a whole was overvalued. IMO, everyone investing in the market should
> first of all understand where we are in long-term and short-term
> history. If we are well in to a period of excess and a generational
> correction is due then you should know and you should blame no one
> else for thinking it will be different this time.
>
> We are in a secular bear market. It may go up a bit. This is a called
> a sucker's rally and if you're astute you can profit from them but
> the market as a whole has years and thousands of Dow points to go
> before we have all been taught a lesson, so conserve your capital
> and be ready when some real investing opportunities arise.
>
> --Fred Voetsch

Market Calls I Got Right - and Wrong - In 2008

"Selling right is more important than buying, at least in the environment that exist(ed/s). Just because something is down 80% doesn't mean it can't go down another 80%. Almost everyone - media, newspaper, books, fund managers - is focused on the buying decision. Nobody talks about the selling decision."

I have given some though to this, and frankly, focusing mainly on the buying decision makes sense.

Only when you are a market participant considering a buy are you in full control. Only at that time can you make an assessment of what that investment is worth in your view, add some margin of safety, and commit (or not) to exchange cash for your investment.

Everything that happens after reflects what others think of the investment, but doesn't necessarily tell you anything about if your initial buy was foolish or not.

A company is available for sale at a stock price X on a certain day. You deem this undervalued and buy the stock. The company consequently increases earnings by 50%. Yet, strong forces from the market crash deflate all stocks and your stock is still quoted 25% lower than your buy price as a result. Now, tell me, was your investment decision a good one or not?

Some would argue that you lost money, it was a bad call, and move on. Well, what if the market goes up and down 25% everyday, are you wrong one day and right the next? What kind of charade would that be?

There is truth that selling is just as important as buying, but when taken to the limit one can see that using day-to-day price quotes as a measure of success in investments is of limited use - unless, of course, one sees stocks as random pieces of paper completely untied to their respective companies. In that case I could understand why someone with no knowledge of the underlying companies would get heavily influenced by whatever other people are screaming on the markets everyday.

Enlightening the Gold Bugs

"i have virtually no faith in anyone else holding my money right now. why would i, when the likes of madoff - with credentials, trust/social strength, industry smarts, etc. are out there?"

All money is by "faith", including gold. Can't anyone see this? "Intrinsic" value of gold? What's that? Gold is worth x$ only because the buyer has "faith" that a future buyer will engage in the same belief system as the original buyer, and pay the same price or higher. It's the same thing as a fiat system expect the supply is supposely quasi-fixed.

Why gold bugs get so excited about what is supposed to be a neutral investment s beyond me. With supply fixed, only demand should affect gold.

In a depression, gold will lose its value like everything else as demand decreases.

In an inflation scare, gold will gain value, yet all things will increase in value, including stocks whose cost inputs are very low or fixed.

Great Depression Not Imminent, But Inevitable

From Boubou:

"One reason many of us have lost so much money is the reluctance on the part of government and finance spokesmen to tell the truth in bad times."

Right. I'm sure you would have lost a whole lot less money if the government had come up one day and said "ok, things are bad, you all should sell now before things get worse.".

Great Depression Not Imminent, But Inevitable

From Boubou:

"One reason many of us have lost so much money is the reluctance on the part of government and finance spokesmen to tell the truth in bad times."

Right. I'm sure you would have lost a whole lot less money if the government had come up one day and said "ok, things are bad, you all should sell now before things get worse.".

Give Me Three Reasons to Stay in This Market

Question: How many whipsaws does it take for an 8% stop loss to equal a 40% loss YTD performance (aka the market performance)?

Answer: Six.

Question: How many weeks in the last two months alone did the S&P's low to high range exceed 8%?

Answer: Eight, with several of the weeks actually walking the most of the range more than once in that week.

Is It Time to Buy Gold?

"If you were fortunate enough to know your parents or grandparents you met people who bought things with gold back when gold was the official US money.
"

Haha! Gotta love the internet! Some people here probably in their mid 20s or 30s trying to teach a 78 year old lessons about the Great Depression! Sorry Pop, looks like the young shots here think if they would have lived in the GD, they would have done way better than everybody, right? heh.

Keep it up!

The End of Excess

???

"Last night I ate at a very expensive new downtown restaurant; it was packed."

Wait, so everybody else but YOU in that restaurant is living an escapist dream and can't afford to be there, right? Oh, wait, you probably just went there for "journalistic" reasons.

Maybe the new "excess" is now every Joe Schmoe believes their neighbor is an evil ex-hedge fund do-nothing who possibly can't have worked for the cash they actually use to pay for what they consume. Of course, everybody thinks "I can afford what I consume, but the neighbors are obviously living WAY beyond their means, right?". After all we've all peeked in their bank accounts.

Some of us actually pay for what we consume, you know, and earn the cash to pay for it with actual work, thank you very much.

Bleeding in the Labor Market

sheople: "With an economy now based 70% on spending and the masses with no money to spend, that 41st is going to be decimated."

I read journalists for facts not speculation, is what you don't seem to get. I think the readership is smart enough to figure out for themselves that the little squiggly line looks headed down, we don't need you to enlighten us to that fact.

Still doesn't change the fact right here, right now, this is the 41st worst drop, not the worst ever.

This does shape up to be one of the worst recessions in a long time... But it also looks like it'll be the one most aggressively fought by the government ever, with an absolute tsunami of money.

I honestly am not sure which side will win... though by nature I would rather bet on my fellow man than against.

Good Times, Bad Times, Same Strategy Required

ChrisB: Personally, I have found a very strong inverse correlation between the thoroughness of research in the articles and the amount of interest and commentary.

I would agree that right now if the articles aren't a) short-term and b) preferably, but not necessarily, bearish, most readers don't even bother.

It is surprising how so little of anything really new has happened in the last two months, and how violently the markets reacts either way.