Another amazing day

Investment Analysis Clubs Saul’s Investing Discussions
21

Saul,

I like your term “Anti-Bubble” for our current macro stock picture. The S&P 500 has been meandering at a snail’s pace for the past year and a half. The average person is not jumping into this market because his neighbor and the taxi driver are making easy money. People are cautious. It would not surprise me to see the S&P make a positive run upwards before the year is out. However, no one can successfully predict short term market movements.

This is a stock picker’s market which is great for those seeking market beating returns via buying very reasonably priced hyper growing, very low debt companies. Earnings ultimately drive stocks higher or lower.

It is my observation that optimistic people make more money than pessimistic ones…this applies to many more situations than stock investing. The inevitable market swoons should be balanced by the realization that markets have inevitably recovered and gone on to new highs since the markets first opened decades ago…but not in a straight line…which presents us with buying opportunities. Yes, fear and greed drives markets, but in the end, patient investors are rewarded by staying with companies with proven improving earnings.

Intelligent patient investing and keeping one’s nerve is a winning ticket in investing. Fear and panic are our worst enemies.

Just some Sunday morning thoughts.

Jim

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22

On valuing the market, I would just say the academics (quiet) are much more interesting than long-only asset-gatherers (noisy).

The probability that returns from the index over the next 10 years will be extremely low is high. The assertion by many LOAGs that PE reversion to the mean will forever be followed by a ‘bounce back’ in short order to restore the over-valuation is optimistic.

(I yield to none in my admiration for TMF but it is of course a LOAG.)

There is no rigidity here. It is just part of the puzzle of how to make a buck investing.

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23

strelna, you are a smart intelligent person but why post something so cryptic.

Bruce

24

It’s true that based on somewhat dubious valuation measures the total return of the stock market over the next decade is likely to be fairly low.

But a decade is a long time, the Dow could go to 25,000 , then to 5,000 then to 26,000 in this next decade and we would have the promised low returns (excluding dividends) But meantime there would be lots of chances to make money or lose money on the way. As investors we live in the land of the NOW, with an eye out for the land of TOMORROW.

Maybe the general market is fairly priced, maybe over priced. Depends on what you measure
My own feeling, not backed by hard data, is that the general equity market deserves a higher price than in much of the past. Because the competition, mostly bond interest rates, has low returns , and the external threats we face are far less dangerous than those we faced from the Stalins and Hitlers of the world.

And we seem to be in some sort of economic recovery. Though this is hard to measure, because data is constantly revised, is of course all backward looking, and maybe not by coincidence, the measuring seems to be done with an optimistic tinge.
I don’t believe the stock market has ever failed to forecast a recession. True it has forecast maybe 15 of the last 10, but that is better than economists who have forecasted almost none of them. At least in advance .

But it is hard to make a fact driven case that equities are cheap, or that returns over the next decade will be high.

Purely a guess but I think this bull has a way to run. Check out the election cycle. OTOH I hear a lot of optimism on MF, not a good short term sign. But that is all guesswork . I will take no actions baed on speculation. Maybe just worry more…

I am a bit surprised by being called a “bear” when that is not what I said at all. We are clearly in a bull market. Also clearly that happy state is not a permanent one. But until it changes, data based changes , not something based on hunches or excessive greed, I will stay invested. But with my finger on the trigger.

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25

I did not mean to be cryptic! The conundrum seems to me to be that the S&P500 is dramatically overpriced on any time-verified measure owing to QE, credit fuelled by low interest rates and the lack of an alternative. The PE range history of most companies attest to the probability of reversion to the mean as these extraordinary times come to a close and normality is restored. Meanwhile the recession which could spell disaster is not yet upon us. The hope is that companies will actually invest rather than engineer (buybacks, M&A etc.) so that sales as well as earnings begin to carry out their own assault on valuation to lower it.

I am finding value only in technology and cash. But here’s cryptic: I literally invested in a Greek sailor I found recently. I thought he deserved help. He had a spiral shell, many short tentacles around the mouth and claimed to be a cephalopod mollusc into muscle-building, fitness and working out!

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26

I am finding value only in technology and cash. But here’s cryptic: I literally invested in a Greek sailor I found recently. I thought he deserved help. He had a spiral shell, many short tentacles around the mouth and claimed to be a cephalopod mollusc into muscle-building, fitness and working out!

Hi streina, I thought at first that you were talking about a squid, but they don’t have shells any longer. And how you get from there to an investment, you’ve lost me.
Saul

27

I believe he is referring to a Nautilus.

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28

You get the cigar and possibly an interesting investment.

29

NLS. It came through my screens and DD so I am giving it a go.

Nautilus (lit. ‘a sailor’ from the Greek) is a genus of several cephalopod molluscs. But it is also a training equipment company with interesting fundamentals. Whether performance is durable is the question.

You run a very interesting board with much food for thought. I have only now come across it. I promise I am not usually cryptic!