Whatever Disney’s problems are, they aren’t unique to the company. The stocks of other companies are tracking the same, suggesting that it’s broader factors that have caused declines. (Pre-market, at 8:30 eastern, DIS was trading sub-$100 or down by half from its Mar '21 intraday high of $203. But we’re still a long ways from a bottom.)
The purple line in the chart is DIS. The black line, MMM. https://www.barchart.com/shared-chart/MMM?chart_url=i_165236…
Disney vs MMM? Why not Disney vs Tesla, or Rivian, or Neflix, or etc.? Your example is apples and oranges.
A more relative comparison is a either a comparison to another multimadia company, like a Universal Studios, or to the major indicies like the S&P 500 and the DJIA.
Or are you thinking that people should invest all their money in MMM instead of having a diversified portfolio?
Walt
Walt,
You don’t understand the point I made by comparing DIS with MMM, which is about as far apart as two industries could be. But if both companies are being traded the same in the market --as an overlay of their price charts clearly demonstrates-- , then what are the factors by which they are being priced? That’s the research puzzle you’re refusing to look at.
You’re obviously long DIS, and you’re obviously losing money on your position, a lot of it, or you wouldn’t be trying so hard to cheerlead it back to higher prices. But investing isn’t a matter of ‘having faith’. Nor does a good PR narrative matter. What matters is whether traders think betting on the derivative --which is what a stock is-- will pay off or not.
If one were to buy the whole company, as Buffet often does, or as Musk just did with TWTR, then how the derivative is trading doesn’t matter. But if one is a typical, small-dollar investor --with less funds than the ability to take a 5% position in the company-- he or she is just betting on the derivative, which often has a very tangential relationship to the underlying.
For sure, one could read the tea leaves of the company’s financial statements, which are mostly accounting fictions meant to spin a story in conventional ways, or one could read the tea leaves of price/volume charts, which also tell a story. But the result of reading either is mostly the same. Neither is ‘hard evidence’. Either is mostly just means to confirm one’s bias. I.e., someone likes the company, and he/she is trying to find reasons to justify making a bet on its prospects.
However, when a stock is bought and its price subsequently declines by a lot, it can become a matter of prudence --if not survival-- to have the humility to admit that one’s forecast/prediction was incorrect, that things did not work out as hoped. No biggie. In markets, as with fishing, not every cast lands a winner. How much is “a lot”? That’s something that’s clearly spelled out in one’s investing plan. Wm O’Neil suggests (-8%) is a good cut-loss point. Others use wider stops to give the stock “wiggle room”. But down by nearly half from its 52-week high clearly suggests the company has serious problems, and that the stock should have sold a whole lot sooner.
Whether Disney as a company survives makes me no never mind. What I do regret is not selling it short a year ago. (One of TMF’s sales reps was touting the company. But his track record as an investor is so abominably bad that whatever he’s touting as a “sure buy” is likely to be just the opposite.) Selling Disney short would have been a fabulous investment. Now, I’m too late to that trade. But it’s still to early to be buying.
Arindam
When you say you regret selling DIS short, do you mean as a technical-analysis-based short, or as a fundamental short? And how do you mean short - short the calls, long the puts, or literally short, as in borrowed shares? I take it not the latter from what you write (reading between the lines of course; directly shorting a stock is something I would never do because it is easy to short in other ways, so I presume you don’t either?)
How do you know you’re too late to the trade? Personally, I would think this market as a whole, as your first post here suggests, is heading down. Let’s face it: we’ve had a big bull run, one that was only in a short way disrupted by March 2020, but now it’s really happening…people are selling as if a giant monster from Creature Feature emerged from Manhattan harbor. Are you saying you’re nervous a bottom may be around the corner? If you are just technically trading everything, gee, I’m not sure we are technically near an upswing at all.
I hear you on accounting stuff, but I guess then you also just technically go in and out of bonds? From what I’ve read, most bond traders do more fundamental research than equity investors, because they really need to assess risk. That struck me as contradictory in terms of your approach, to be honest. But I do think technical trading has its place for small investors (and even younger investors). The IBD/O’Neil protocols are fascinating (I think O’Neil would say to be all in cash right now, to be honest, except for whatever bull-market sector is out there)
I was confused at first as Walt was about the comparison, but I did eventually intuit what you meant - right now, the market is all Black-Swan-event-potential, all the time. As you say, just go with the reality at any given moment and let emotion find its way to the door…but I will say the reality is too that we will get through this bear market as we did '08 and some long positions now will reward very mightily.
MMM has a big product liability problem: defective earplugs, made by a subsidiary, sold to DoD. Soldiers suffered hearing loss due to the defective plugs.
Honeywell’s plan to spin off Garrett, then have Garrett cover Honeywell’s asbestos liability went up in smoke when Garrett went BK and the court invalidated the scheme to bleed Billions off Garrett to help Honeywell, so the liability is back in Honeywell’s lap.
JNJ is working a very sketchy scheme to duck it’s talc liability. It’s possible the court could throw out that scheme, which is why I suspect JNJ is spinning off it’s consumer products division, as a back-up bag holder for the talc liability.
I don’t think DIS has a liability problem like any of those.
Steve
esxokm,
It’s no secret that our dear forum hosts hate Technical Analysis (TA). But I’d accuse the G BoyZ (and their staff of writers) of being pretty sloppy Fundamental Analysts (FA) on the basis of how bad their stock picks often are when you go back and actually do the fundamentalist work that should have been done before those stocks were pitched to subscribers (as being “the next Amazon” or whatever.
So here’s how I look at the vetting problem. If you’re trying to do a very short-term trade, say, in and out in under 7 minutes, you can get away with not doing any fundamentalist work. But that’s a really risky way to trade, because what you’ll find is this. The best short-term trades are done on stocks that have solid fundamentals. Those are the ones that chart the best and for which it’s pretty easy to find a buyer when you want to get back out. The same is true when selling short. If good old-fashioned, green-eye-shade work suggests that a stock is a piece of over-priced trash, that’s a fact “the market” will agree with soon enough for you cover and get out with the profit you thought you saw.
Said another way, FA plus TA equals RA (Rational Analysis). Both disciplines are necessary if one’s goal is to make a few bucks AND to avoid as much grief as possible.
Bonds are a whole 'nother gig. For all practical purposes, they cannot be “traded” at the retail level. They really are ‘buy-and-hold’ investments. Reasons? Historical data used to be nearly impossible to obtain. Spreads and commish are still abusive today, never mind that few brokers give bond investors direct access to the network of underlying desks actually holding inventory. The position you own might not be of a marketable size. Etc. Etc. The obstacles are formidable and endless, compared with stock investing/trading, or forex for that matter. OTOH, bonds are puts, and just like their more familiar counterparts, they can suffer from time decay. So, yeah, then it can make sense to trade out of them to capture a fatter profit than holding to maturity would have offered.
Yeah, “the market” is crashing and for reasons all of us know why. There is nothing “Black Swan” about what is happening. The declines do mean that “the market” has gotten interesting again, and I’ve been shopping hard the last couple of days, adding a couple dozen new positions. So, No. I’m not going to go to cash, nor am I inclined to do so. But neither am I betting big, because we’ve got a lot further down to go.
As for being too late to short DIS, just watch how it has been trading the last couple of days. There’s too much of a fan base that keeps stepping in and buying the lows. It’s far easier to short the broad market via an inverse like SPXS (which I was in and out of a couple times today).
Arindam
Steve,
Good thoughts on why MMM and others are trading as they are. Disney doesn’t seem to have the same sort of impairment problems, and Moody likes the company. (Their ratings report is all but a love letter.)
But do this. Set up a 2-year line chart for DIS and then overlay the other 29 stocks in the index on that plot, one at a time, looking for patterns. If Disney really is as healthy as everyone thinks it is, why is it trading exactly like MMM, which has admitted problems, and why is it trading worse than the broad market (using SPY or RSP a proxy)?
If there’s a divergence, there’s a reason. Somebody knows something, and the stock is being traded on basis of that knowledge, because Disney’s stock declines began long before the Florida brouhaha.
We’ve seen this pattern before, with Enron’s stock, with GE’s bonds. Always, traders are ahead of the analysts in discovering and discounting material facts, and they are a tell worth paying attention to. That’s something I learned long time ago. When I wanted to buy a bond, I’d also look at how the stock was trading. If it was being sold down, that meant that people smarter than me were worried, and that I should be, too.
But in the case of Disney, just the opposite it happening. The bond guys aren’t worried, but the stock guys are. Why? I don’t know. But it’s enough to scare me away from wanting to own DIS.
Arindam
You’re obviously long DIS, and you’re obviously losing money on your position,…
Man, are you waaaay off base. Having bought Disney shares back in the 1990’s and you figure a dollar cost average of $33 dollars/share, plus counting in stock splits and dividends, even at a $100 dollar share price I am a long way from losing money.
It is called " Long Term Investing" for a reason.
By the way Disney is back above $100/share.
https://www.fool.com/investing/2022/05/12/1-disney-theme-par…
Walt
You may also want to see the Motley Fools stock chart for Disney to see that its return on investment is several THOUSAND percent higher than the S&P 500 Index over the coourse of the chart.
Walt,
On 03/08/21, you could have sold your position for close to $203.02 per share. This morning, you’d only get $107.29. The fact that your basis is $33 is irrelevant. You had a fat profit, and you let the market take it back nearly half of it. That’s an opportunity loss that you won’t likely ever recover from due to the erosions of inflation, even if you do regain nominal principal.
For sure, it is hard to buy the low and get out at the high. It does happen occasionally. But generally, no matter one’s intended time frame, all of us are late getting in and late getting out. Also, “How late”?" is ‘too late’ is going to vary from one investor to another depending on their means, needs, goals, and personalities.
If you’re happy with seeing your profits cut in half, then you’re happy. Frankly, I’d be appalled and kicking myself for not having been a better financial steward. But then, we don’t look at the world the same way, which is to be expected, because each investor is unique, and there is no one right way to do any of this investing/trading stuff.
Arindam
Arindam,
Your logic only holds if
And neither of these scenarios holds true so I will continue to hold my shares as part of a divesified portfolio and will sell when needed to keep a balanced portfolio.
Walt
"Your logic only holds if
1) You believe that $203.02 is going to be its highest future value
2) That I have a immediate need of the money and want to take the tax hit"
Walt,
Your first point is shrewd. But let me ask a question back. How far in the future does that higher price point have to be before it would have been far better to cash in and deploy the money on a better opportunity? That’s the huge unknown all of us make choices about.
I’m a ‘bird-in-the-hand’ investor. That’s not a matter of math. It’s a matter of genetics, and that’s one of the ways we differ in our approaches to investing. Also, I think that stock prices are headed lower for at least the next 2-3 years, if not the next 10. Meanwhile, inflation will run high. In that environment, I don’t want to be owning US companies whose revenues depend on there being a prosperous middle class with discretionary income. In other words, I’m making a macro-economic forecast that says that Disney isn’t going to do well. You think the opposite, and it’s differences of opinion that make markets.
Taking profits has nothing to do with having to sell for needing money. It has to do with selling what should be sold, when it should be sold, instead of being forced to sell at a later time at a worse price. As for delaying selling to avoid taxes, that is a futile hope. The Democrats have already announced that income taxes will be going higher for us peasants. Not only that, they also want to start taxing unrealized gains.
Arindam
Arindam,
It’s no secret that our dear forum hosts hate Technical Analysis (TA).
I’m not exactly a fan of it, either.
So here’s how I look at the vetting problem. If you’re trying to do a very short-term trade, say, in and out in under 7 minutes, you can get away with not doing any fundamentalist work. But that’s a really risky way to trade, because what you’ll find is this. The best short-term trades are done on stocks that have solid fundamentals. Those are the ones that chart the best and for which it’s pretty easy to find a buyer when you want to get back out. The same is true when selling short. If good old-fashioned, green-eye-shade work suggests that a stock is a piece of over-priced trash, that’s a fact “the market” will agree with soon enough for you cover and get out with the profit you thought you saw.
That’s called gambling – not investing. By the time that you get the news that inspires a “short term” trade, the institutional investors who dominate the market have already reacted and the stock has already moved so it’s too late.
BTW, I fully respect your right to gamble if you wish to do so, but I’m not a gambler. I don’t buy any stock with an intend to sell it. Like Warren Buffet, my favorite holding period is forever.
That said, there are four situations in which I will sell shares.
- I make small trades as necessary to rebalance my portfolio to my target allocation, but these trades are typically less than ten percent (10%) of a position – and yes, I LOVE volatility 'cause I profit from it! These are my only routine sales.
- I have occasionally sold shares in one account and purchased the same stock in another to move a position.
- Whenever I see clear indications that a company in which I own stock has “jumped the shark” (which does not happen often), I liquidate my whole position immediately. I’m getting out of the position before the downturn in business shows up on a quarterly report and everybody else tries to sell, causing the price to crash. JTOL, this is a situation in which I probably should purchase “put” options, but I have not yet done so…
- If I find a company in which I want to invest, I may sell a small piece of my other positions to raise cash for the investment.
But apart from those scenarios, I’m not selling.
You don’t have to take ridiculous risks to do well as an investor. If you invest in Vanguard’s Total Stock market Index Fund, you’ll realize a compound average growth rate slightly ovre 10.6% per year over the long term, which averages out the market’s fluctuations – and you’ll enjoy a very secure retirement with no work whatsoever. But by investing for the long term in well-run companies, you can produce more than double that growth rate and get to a very secure retirement a lot more quickly.
Bonds are a whole 'nother gig. For all practical purposes, they cannot be “traded” at the retail level. They really are ‘buy-and-hold’ investments. Reasons? Historical data used to be nearly impossible to obtain. Spreads and commish are still abusive today, never mind that few brokers give bond investors direct access to the network of underlying desks actually holding inventory. The position you own might not be of a marketable size. Etc. Etc. The obstacles are formidable and endless, compared with stock investing/trading, or forex for that matter. OTOH, bonds are puts, and just like their more familiar counterparts, they can suffer from time decay. So, yeah, then it can make sense to trade out of them to capture a fatter profit than holding to maturity would have offered.
Well, bonds basically are loan instruments – you lend money to a company or a government entity that agrees to pay you back, with interest, when the bond matures. Thus, the intrinsic value of a bond is the present value of the future payments, potentially discounted for any risk that the issuer will default. So, values of bonds go down when interest rates go up because the present value of the future payout diminishes.
Now, bonds can be useful instruments in certain situations. However, it’s pretty apparent that interest rates are going up very quickly and will continue to do so for some period of time due to inflation, causing all outstanding bonds to plummet in value. Thus, this is not exactly a good time to invest in bonds of any kind.
Yeah, “the market” is crashing and for reasons all of us know why. There is nothing “Black Swan” about what is happening. The declines do mean that “the market” has gotten interesting again, and I’ve been shopping hard the last couple of days, adding a couple dozen new positions. So, No. I’m not going to go to cash, nor am I inclined to do so. But neither am I betting big, because we’ve got a lot further down to go.
The $64 question is how much more the market will drop in the present environment. I don’t see inflation abating until there’s an adequate supply of petroleum and natural gas. The Biden administration could help the situation by supporting expansion of domestic production, but just announced another cancellation of sales of drilling rights. 
Norm.
Now, bonds can be useful instruments in certain situations. However, it’s pretty apparent that interest rates are going up very quickly and will continue to do so for some period of time due to inflation, causing all outstanding bonds to plummet in value. Thus, this is not exactly a good time to invest in bonds of any kind. "
Norm,
Yes, bonds re-price up or down as interest-rates change. However, making bets on the level/direction of interest-rates isn’t the whole of the bond game. Bets can also be made on the level/direction of an issuer’s credit worthiness. That’s not a gig many investors attempt. Instead, if they want exposure to the rewards that can be offered by spec-grade debt or if they value the diversification that the asset-class can offer, they use a fund, and there are/were some good managers out there, e.g., Danial Fuss. In fact, for some types of bonds, e.g., foreign sovereigns, using a fund is one’s only practical choice, because so few issues come onto the secondary market and almost never in sizes a retail account can afford. But there are zero reasons --except limited capital and the unwillingness to do basic credit analysis – why a small account who needs/wants exposure to treasuries, agencies, or munis shouldn’t own his/her own bonds directly.
As for your dismissing some types of investing activities as “gambling”, that just plain silly. All of it is gambling. In every and all cases, a would-be investor is making a bet out the outcome of some unknowable future event. Whether that outcome is as brief or binary as a coin flip or something more complex and 20, 20, 100 years into the future, the unknowability of the outcomes isn’t materially different. So, what do I consider to be true investments? Time spent with family or friends. An afternoon walk or bike ride. Education. Timely medical checkups. Everything else is just fancy coin flipping about which one doesn’t need to be right very often if payoffs are asymmetrical.
But here’s the benefit of taking the point of view that investing is just socially-approved gambling. It focuses one’s attention on two problems that “long-term” investors typically ignore: the impact of ‘position-sizing’ and the need for aggressive ‘risk-management’.
Arindam
I am also a Warren Buffett fan and I buy a stock to “own” it and I am not looking for short term payouts and high capital gains taxes. A lot of people have lost money betting against Disney, I was able buy nice blocks of stock on those dips in the 90’s, and some of us a rode on to some great returns.
Besides I would rather not pay Uncle Sam any more than I have to in taxes.
Walt
P.S. It is a Republican Rick Scott who is proposing middle class tax increases and not the Democrats unless you figure $400,000 a year income as middle class.
Walt,
I’m not as much a fan of Buffet as I am of his mentor, Ben Graham. My objection to Buffet is he’s mostly modeling behaviors that small investors can’t imitate. Like, when’s the last time any of us bought controlling interest in company, much less the whole thing? But reading The Intelligent Investor the Fall of '99 was what got me into bond investing. As you’ll remember, no-earnings trash with ‘Dot Com’ in their names was being being bought and bragged about. Meanwhile, the bonds of companies with solid fundamentals weren’t just being ignored. They were being scorned, scoffed, and despised.
“BINGO!” I said to myself. “Straw hats in December.”
Initially, every time I bought anything, I was all but vomiting in fear. I’d do my research and get ready to pull the trigger and then have to back away and run through the whole vetting process again to calm my stomach down. Nor was breaking into the bond market easy in those days. Historical data was unavailable. Spreads were wide. Commish was atrocious. Mins were punitive. But purchase by purchase, I learned the game, enough so that once when attending a Schwab seminar on investing, I was able to wrangle a meeting their head of research of fixed-income investing.
When my 5 minutes came and I showed him what I was doing, his eyes lit up. “You get it. You really do. I wish my high net-worth clients understood what you do, that bonds are puts and you’ve gotta harvest profits as fast as you can and get the money back to work.” We chatted. His secretary kept popping her head in the door, saying that so-and-so was waiting. He’d wave her off, and we kept chatting until it really did become obvious that he had to talk to other people, though he didn’t want to.
Back in those days, there was not only killer money to be made by applying to bonds the same value investing techniques that Graham advocated for stock investing, but there was also fun money as well. Eg., Friendly Ice Cream had bonds. There was none of their shops on the west coast where I live. So I asked my mid-west daughter to do some field research for me. (A cute story I’ve told elsewhere.) But the net result was another 15%-18% per year win, which is decent money. These days, the bond market has all but been destroyed by the Fed’s policies, and they’ve painted themselves into the corner of being unable to raise interest rates enough to break inflation unless they also want to trash the economy, which not raising rates is going to do so anyway, because of the money printing, never mind the currency war the US is losing.
So, yeah I do some trading. But I also own investments whose maturities are so far into the future I won’t live to see them, nor will even my kids. Each type of investing serves a different purpose and has a different appeal. Stock guys are optimists. Bond guys are pessimists. And temperament is destiny.
Arindam
Walt,
You are right about the tax hit on long term investments. I just went through it with an unexpected cash buy on a long time held dividend achiever which I had been holding since the early 1990’s. They were bought out by an over seas corporation for cash and the tax blow back was horrendous and unexpected. Often sitting tight is in a volatile period like this one is the smartest thing to do. - Ned
i
Arindam,
As for your dismissing some types of investing activities as “gambling”, that just plain silly. All of it is gambling. In every and all cases, a would-be investor is making a bet out the outcome of some unknowable future event. Whether that outcome is as brief or binary as a coin flip or something more complex and 20, 20, 100 years into the future, the unknowability of the outcomes isn’t materially different.
Well, if your definition of “gambling” is anything in which the outcome is tied to statistical probabilities, all investments fall into that category.
But having said that, the statistical probabilities associated with stocks of good companies over a long term (twenty years, or even fifty years) are very different from the statistical probabilities of stocks of good companies over a matter of hours or even days. We saw this play out in wake the 2008-2009 crash of the stock market – the market dropped in half, falling from hovering around the trend line, or normal economic conditions, in the middle of 2008 to the bottom envelope of a “bust” economy in March of 2009, then more or less tracked that bottom envelope until November of 2016. However, that bottom envelope rises at a rate of 10.8% per year so it put the market was at record highs by November of 2016 – and people who bought stocks before the crash and didn’t sell in the downturn recovered what they had invested.
Sure, there is always the possibility that a company can fall into the hands of incompetent management, or that new innovations can dry up the market for a particular line of products, or that something else can result in a company going under – but the 10.8% compound average growth rate of the U. S. stock market has all of that already factored in. Those of us who invest in individual stocks obviously need to pay attention not only to the companies in which we’re invested, but also to the larger picture of the continued relevance of their products. Nevertheless, good companies with relevant products should be able to produce a much higher rate of return – and I’m not laying awake at night worrying about my positions.
But here’s the benefit of taking the point of view that investing is just socially-approved gambling. It focuses one’s attention on two problems that “long-term” investors typically ignore: the impact of ‘position-sizing’ and the need for aggressive ‘risk-management’.
The best risk management is diversification across several positions in businesses that don’t correlate with one another. Nevertheless, I’m not about to invest in a business that I don’t understand or an industry that I don’t know for the sake of diversification.
Norm.
Ned and Walt,
You are right about the tax hit on long term investments. I just went through it with an unexpected cash buy on a long time held dividend achiever which I had been holding since the early 1990’s. They were bought out by an over seas corporation for cash and the tax blow back was horrendous and unexpected.
The silver lining here is that that tax on long-term capital gains is much lower than the tax on ordinary income or on short term capital gains – but there’s actually a way out if you wish to make a significant donation to a charity. There are two steps.
- Donate appreciated stocks instead of cash. You don’t realize, and thus don’t pay tax on, the capital gain, but you can deduct the full appreciated value of the donated shares if you have enough deductions to itemize.
- Use the cash that you would have donated to replace the shares in your portfolio. The basis of the new shares is the amount that you pay for them, so the capital gain when you sell them will be considerably less than the capital gain on the donated shares.
The only “down side” is that this approach resets the timer that determines whether the capital gain is short term or long term – you have to hold the new shares for more than a year for the capital gain on the new shares to be long term. However, the capital gain typically will be quite small if you hold the shares for less than a year so the tax won’t be much.
As to the cash buy-out, there’s usually enough notice of a buy-out to provide time to donate shares to your favorite charity before it closes – and the price of the stock usually rises to very near the buy-out price well before the buy-out closes. Thus, it’s possible to shield most of that capital gain from taxation if you are making a donation to a charity.
BTW, my broker offers an option to open a “donor-advised fund” that is itself a legal charity. You can move assets into the donor-advised fund and get an immediate reduction, then direct the donor-advised fund to pay the proceeds to your favorite charity over the course of several years.
Norm.
… people who bought stocks before the crash and didn’t sell in the downturn recovered what they had invested."
Norm,
No, they didn’t “recover” what they had invested. They lost money, because the dollars they regained in the 2016 date of your example had less purchasing-power than the pre-2008 dollars they used to buy their stocks.
Explanation. The CPI has been revised so many times that it’s a useless metric. What matters is one’s own Personally Experienced Rate of Inflation (PEIR). From tracking my own for many years, I know my household rate of inflation runs pretty consistently at 4.5%. (And I’ve always used a 6% inflation-rate and a zero portfolio gains-rate when projecting retirement incomes and expenses.) Therefore, for every $100 dollars of pre-2008 dollars I might have put into stocks, I might have been able to regain-- 8 years later, in the 2016 date of your example-- $69.19 of value. To say to that again, by 2016, their stocks had regained their 2008 price, but not their 2008 purchasing-power equivalent. That’s trading elephants for rabbits.
Aside: For me, due to some disciplined, counter-trend investing, by June of '09 I had gained backed every penny I lost in '08 --still not owning a single stock-- , and I ended the year up 34%, or about what the active stock guys did that year, but not them who had hunkered down and held throughout the downturn. Whether I can do the same in the coming downturn is uncertain. But the same strategy will be used. Sell --before one has to-- what should be sold-- and use the money to buy what should be bought, when it should be bought. Or as has been quipped, “Timing isn’t everything. It’s the only thing.”
The larger context of our back and forth is this. You believe in the conclusions that can be drawn from Bachelier’s 1900 PhD thesis, Théorie de la spéculation, and the policies later developed by the Chicago School of economists and then still later by popularists such as Malkiel or Seigal. I don’t, because it takes just a spreadsheet, access to stock prices, and ten minutes to disprove their claims. But if you want a fuller discussion, read what Talib or Mandelbrot have say about Modern Portfolio Theory, the Efficient Market Hypothesis, etc. and why they dismiss those ideas as nonsense.
Beliefs drive actions. My belief is the coming downturn will be horrific, but also a fabulous opportunity. That’s why I’m reviewing what I believe about how markets work and why I’m running small experiments right now as I try to find a means to make a few bucks when prices crash again, as they will.
https://www.amazon.com/Misbehavior-Markets-Fractal-Financial…
https://www.amazon.com/Fooled-Randomness-Hidden-Markets-Ince…
Arindam,
Starting in 1980 and every year afterwards I continued to buy every month as I set aside 10% of my salary to make more stock purchases and thereby take advantage of the DJIA and the overall stock market. As is happening now there were, and are, a lot of solid, well managed, and profitable companies that have been dragged lower by any market drops. When the market recovered, I not only got back my “losses on paper” but also made so nice “profits on paper” because until you sell you have neither loss nor profit.
So, if you have the cash, that you don’t have an immediate need for, this is exactly when you want to get out your thinking cap and look for “deals” in blue chip and market dominate companies.
I believe the theory goes; that when everyone else is selling it is the best time to buy.
OTFoolish