I didn’t mean to imply that blue chip stocks do not go down. Yes, corrections happen to all stocks.
But a speculative stock with no earnings or a PE over 200 can fall a lot more than a blue chip with solid earnings and a PE of 20. Blue chips are much lower risk.
I hear you. The point I was trying to make is, we are in a bull market and everything is rallying. In these conditions, when a blue chip falls it comes back. OTOH, when the environment is not constructive… blue chips, earnings, PE doesn’t matter.
Below is MSFT from 2000 to 2014, Green line is QQQ. You can see a decade of not going anywhere. When the environment is not constructive it doesn’t matter. Of course, blue chips perform relatively better, valuation matters, because how far you fall, etc.
The biggest question I am struggling with is, how much leg this bull market has, is the next drawdown, garden variety or are we looking at decade of sideway movement. This is where not getting rich twice comes. I know investments are suppose to be easy, buy good companies, sit back and clip dividend coupons, increasing dividends, higher stock price… but life in general and investment in particular is anything but. 
Will earnings continue to rise? When earnings rise either share price goes up or PE goes down.
The long term trend continues upward.
PE can keep going down. MSFT and WMT from 2000 to 2012 earnings were increasing, revenues were increasing and stock went nowhere. See below…
See below, We are not at 1999 level, but we are not very far either.
I know, all investment wisdom states earnings, revenue growth matters. But, my eyes were opened by David Tepper with his balls to the walls… If the environment is not constructive, you need to protect capital. You have no idea how long it will take for things to turn around.
You play offense or defense is dictated by the environment, not by how much money you made last year(s).
It worth noting that even in bull markets, the market can sell off substantially yet continue to be a bull market. We don’t need a recession for the market to correct.
I am hopeful of sideways action next year but I am now sitting on the highest percentage of cash I have had in years.
Never, take your foot off the gas.
I never went deer hunting for the meat, it was all about the hunt.
Unfortunately in most of my working years, while I had good income, lived conservatively and saved, I was never very analytical about my investing strategy.
I needed a challenging outlet for my technical skills 24 years ago retirement and options trading filled the bill. Now I love deer hunting and investing, and for both it is the hunt and not the meat.
You know what? There is a lot of meat as a by-product when you focus in the hunt.
Yes, irrational exuberance or fear can cause markets to do extremes with PE up or down.
But i would be very surprised to see Apple trading for less than the PE of 6 we see for GM today. Plenty of investors would be willing to jump in long before that.
Never mind that GM markets are mature and EVs threaten loss of market share. Clearly not a growth stock, maybe in decline unless saved by the new presidents tariffs.
