Does anybody remember...

Investment Analysis Clubs Saul’s Investing Discussions
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Does anybody remember…Brexit?

Only months ago, when everyone was telling you that the world was coming to an end, and you should sell all your stocks, because one out of 26 countries in the European Union voted to leave it? It’s faded from your memory already, huh? Let’s see:

Arista fell from $74 to $61. If I had sold out at $61, I’d have missed a 117% rise in Arista to $132.60 today

Paycom got as low as $39.50. If I had sold out at $39.50, I’d have missed a 46% rise in Paycom to $57.85 today

Shopify fell from $31.25 to $27.15. If I had sold out at $27.15, I’d have missed a 153% rise in Shopify to $68.70 today

And all that in less than a year. You get the picture…

And think back a little over a year, to Feb 2016 when tech stocks fell off a cliff, and everyone was talking about how overpriced they were, and those TA guys miraculously appeared on our board to tell us that all their indicators said sell, sell, SELL! Can you even remember that panic?

The message:

If one stock is falling like mad, and everything else is doing just fine, you need to worry, find out why, and decide whether or not you need to get out.

If all the stocks are falling for no apparent reason, or an inadequate one, don’t pay attention to the doom and gloomers. They’ve been wrong for over 200 years worth of a rising stock market, and if they say “This time is different!”, take it with a grain of salt.

Saul

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But we also need to recognize real bubbles like the Internet Bubble, the Housing Bubble, the Nifty 50 Bubble, and the Roaring 20’s Bubble. I’m mostly through reading Maggie Mahar’s “Bull: A History of the Boom and Bust, 1982-2004.” My (library) copy must be an older edition, since the title is “Bull: A History of the Boom 1982-1999.”

The Brexit mini-crash was a case of Mr. Market’s depressive over-reaction to something involving one country, where the consequences were really unknown, but assumed to be very broadly bad right away. The February 2016 market drop was an over-reaction to the possibility of a Fed interest rate increase, if I remember right. In neither of these cases was the market becoming saturated with stocks trading at too-high P/E ratios.

In the Internet bubble, so many stocks based on just an idea (but no profit or even decreasing losses) were trading at higher and higher prices. Creative accounting played a pretty big role, too, which is why I’m now keeping an eye on Beneish M-scores when I think about buying a stock.

Saul (because there’s a chapter in “Bull” dedicated to it as a case study), did you ever hold AOL stock back in the 90’s? What was your thinking about it? Did the Motley Fool often recommend it?

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Saul (because there’s a chapter in “Bull” dedicated to it as a case study), did you ever hold AOL stock back in the 90’s? What was your thinking about it? Did the Motley Fool often recommend it?

I sold my mutual funds in 1999 and bought a total of 16 companies. AOL was one of the 16. It was fun, until the dotcom crash came. I learned a lot from that experience. I was slowly learning more about investing until 2005.

In 2005, I joined Stock Advisor. That’s when my investing skills improved a lot. My XIRR since 2005 is currently 15.4%.

Fool on,

mazske

All holdings are shown in my profile

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If all the stocks are falling for no apparent reason, or an inadequate one, don’t pay attention to the doom and gloomers. They’ve been wrong for over 200 years worth of a rising stock market, and if they say “This time is different!”, take it with a grain of salt.

And buy at bargain prices.

k (depending on your timeline, of course)

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Saul… did you ever hold AOL stock back in the 90’s? What was your thinking about it? Did the Motley Fool often recommend it?

Hi Ed, Yes I did hold it and made an enormous profit on it, and Yahoo, and Amazon. (My portfolio was up 115% in 1999). Here’s the write-up from the Knowledgebase. You really should read the Knowledgebase, it makes fascinating reading even for me (and I wrote most of it).

I lived through the Internet bubble of 1999-2000. I sold out of Amazon, Yahoo, and AOL one day in January or February of 2000, after Yahoo, as I remember, had gone up something like $30 to $50 per day for three days in a row. I said to my wife, “They may keep going up, but this is insane. I’ll let someone else have the rest of the ride.” The bubble broke about 3 weeks later. Sometimes selling can be the most important thing you can do. I didn’t get out of the market. I just bought non-internet stocks and was up 19% for the year. Sure I could have held through the decline, and 10 years later Amazon came back, even if Yahoo and AOL never did, but why???

I have no idea whether MF recommended it back then.

Saul

For Knowledgebase for this board,
please go to Post #17774, 17775 and 17776.
We had to post it in three parts this time.

A link to the Knowledgebase is also at the top of the Announcements column,
which is on the right side of every page on this board

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You really should read the Knowledgebase

Just defending those of us with memories that may not be the greatest. So, for instance, I’ve read the Knowledge Base but didn’t remember the bit about Yahoo.

So, Saul it is possible that we’ve read the KB, but still ask a question that may have been covered there anyway just because we don’t recall everything in it.

Not a big deal obviously, just sayin.

Take care,
AJ

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So, Saul it is possible that we’ve read the KB, but still ask a question that may have been covered there anyway just because we don’t recall everything in it. Not a big deal obviously, just sayin.

Sorry AJ, didn’t mean to hurt anyone’s feelings. Just like to encourage people to read it.
Saul

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My feelings aren’t hurt. I read the knowledgebase very recently and just happened not to remember the part about AOL. Saul, you were VERY lucky to get out with a profit on AOL that late in the game. If “Bull” is correct, AOL was always unsound since the IPO!

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Lest you think nobody can do it, a big part of Saul’s success is a nose for when to get out. Smell that stock decay odor just a bit before anybody else. Leave the rowdy party 10 minutes before the cops arrive.

I don’t think it is something that can be learned, you either have it or you don’t.

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“Bull” has a lot of text about astute money managers leaving the dot-com bubble much earlier, because the valuations made no sense to them. Then they had to figure out where else to put their money, and face condemnation for not making crazy profits like the people who were staying up to their necks in the high flyers.

MF did well because they found some big winners, like Amazon. But I bet they were also enthusiastic about a bunch of crazier ones like AOL. I didn’t invest much in dot-coms. I was just getting my feet wet in the 90’s, and thought that the P/E’s and other valuations were crazy. I would have made money shorting Yahoo if I hadn’t overextended myself by selling too many naked calls, ended up shorting too many shares, and failed to bail out of some of them at a reasonable time to limit my losses and survive until the crash. I ended up down about $50K. Then I stayed out of the market until a little over a year ago. I think I made at least that much back in 2016.