patrick.net

Quigley says

There’s just no reason to cry havoc, which means there’s no reason for a sustained drop.

Do any of you actually understand how to put a value on a stock based on earnings and other fundamentals?

Malcolm says

Quigley says

There’s just no reason to cry havoc, which means there’s no reason for a sustained drop.

Do any of you actually understand how to put a value on a stock based on earnings and other fundamentals?

Yeah, but the P/E ratios vary widely depending on the economic cycle. Currently we haven't left the boom cycle yet, which was about to end but got unexpectedly prolonged by Trump's election.

mell says

Yeah, but the P/E ratios vary widely depending on the economic cycle. Currently we haven't left the boom cycle yet, which was about to end but got unexpectedly prolonged by Trump's election.

If people are investing in companies with P/E ratios that are 3 figures, I would strongly suggest that they go onto YouTube and watch an old Coyote and Roadrunner cartoon. You are pretty much standing on air, just like the coyote when he holds up a sign that says "Yikes."

When you buy a stock, you are buying a piece of a company, you are not guessing what a trend is doing. If people insist on overpaying for stocks, like they are with houses, please don't expect any sympathy. There are too many investors who are too young to have ever seen a bear market. Those guys can expect a large leftover credit card bill on top of their defaulted student loans.

Malcolm says

When you buy a stock, you are buying a piece of a company, you are not guessing what a trend is doing

Well, yes, but you can sell that stake the next second. Trends are important. The stake of the company you bought for 1 dollar can become 1000 dollars or the stake you bought for 1000 dollars can be worth zero.

Companies can write off your stake or just close shop .

Plus the rally from the bottom of 2008/2009 I think DOW was at 6,000+ and reached 26,000+. That is a pretty impressive run.

Malcolm says

Quigley says

There’s just no reason to cry havoc, which means there’s no reason for a sustained drop.

Do any of you actually understand how to put a value on a stock based on earnings and other fundamentals?

That kind of rationality is frequently missing in the stock market. The big elephant in the room is the tax cut. A lot of money is going to be looking for a home.starting pretty much right now. Lot's of stock buybacks, lots of dividends. It's got to go somewhere.

bob2356 says

The big elephant in the room is the tax cut. A lot of money is going to be looking for a home.starting pretty much right now. Lot's of stock buybacks, lots of dividends. It's got to go somewhere.

It's a race. Many companies already announced stock buybacks and they are not going to be buying a huge supply of treasuries that's a result of the tax cut. Can interest rates get high enough to force stock market revaluation?

Malcolm says

Do any of you actually understand how to put a value on a stock based on earnings and other fundamentals?

Most people on this board don't even know what market cap is.

bob2356 says

Malcolm says

Quigley says

There’s just no reason to cry havoc, which means there’s no reason for a sustained drop.

Do any of you actually understand how to put a value on a stock based on earnings and other fundamentals?

That kind of rationality is frequently missing in the stock market.

That kind of rationality does not work. If it did, all those Harvard trained money managers would be beating the S&P 500, but 95% of them can't.
Stock picking is more of an art than a science.

lostand confused says

Plus the rally from the bottom of 2008/2009 I think DOW was at 6,000+ and reached 26,000+. That is a pretty impressive run.

Remember, the DOW was at 14,000 before it crashed down, so before you can bank any gain, it has to get back to break even. For anyone who was in the market pre-2008, they had to wait until 2013 before breaking even, then from 2014 to 2016 (trump's election) the market barely moved and went side ways. You had a 8,000 point gain since Trump's election, before this latest correction.

anotheraccount says

Most people on this board don't even know what market cap is.

I went to cash this week.

I feel a combination of QT (reverse QE) and rising interest rates will cause headwinds.

I feel like I need a 6 month break from the markets.

Time will tell.

Strategist says

Stock picking is more of an art than a science.

And so far I’ve been pretty much smack on the money when it comes to general market trends. I even called the 2008 crash (and put my money in bonds at end of 2007) and the subsequent rally once bottom was found. Stock markets aren’t rational, they’re trendy and they’re dependent on the worst kind of group-think. If you want a recent example, I called the rebound off the dip a few weeks ago.

Quigley says

Strategist says

Stock picking is more of an art than a science.

And so far I’ve been pretty much smack on the money when it comes to general market trends. I even called the 2008 crash (and put my money in bonds at end of 2007) and the subsequent rally once bottom was found. Stock markets aren’t rational, they’re trendy and they’re dependent on the worst kind of group-think. If you want a recent example, I called the rebound off the dip a few weeks ago.

You outperformed the so called best stock pickers out there. Yet they get to make the big commissions.

Strategist says

That kind of rationality does not work. If it did, all those Harvard trained money managers would be beating the S&P 500, but 95% of them can't.
Stock picking is more of an art than a science.

The word you are looking for is gamble, not art.

and in other news, the DOW is UP +250 right now.

anon_cf6c6 says

and in other news, the DOW is UP +250 right now.

I don't think this will crash now. But it has been a spectacular straight up run, so just wondering if this correction is done or becaus eof the speed of the correction and subsequent rush up, will it unwind a few months?

Rule of investing: buy cheap with safety margin and sit on it and collect dividend. this is wealth creation.

Rule of gambling: 5% win, 95% lose. This is wealth transfer.

FED says, everything has zero yield, everything must be expensive. So I can NOT invest.

I am also NOT smart enough to be the 5% in the gambling game.

Fortunately, I do know how to do my W2 job and I do it better than others.

So I will earn my living until it gets cheap. Before then, I am just the idiot being screwed by low rate and inflation. Ben and Yellen spent years forcing me to play a game I am NOT good at. I am stubborn. But until I am sure I am the 5% gambler, I will NOT play their game.

Strategist says

Stock picking is more of an art than a science

That’s because the stock market fluctuates based on human nature, and the people most qualified to understand human nature are not scientists. They are artists and shamans, and always have been.

Dow in range of all-time high again. Will cross it soon.

Yeah looks likely. The speed of the correction was very fast, I thought it would consolidate a bit before pushing higher-oh well !

lostand confused says

I thought it would consolidate a bit before pushing higher-oh well !

Doom cancelled!

DOW closes up just shy of +400 points.

Looks like a nice drop today, lets see where it ends up. I still think 22k or 23k and grind around for sometime before it resumes its climb. That was a very swift drop for it rise and go as if nothing happened. Lets see.

lostand confused says

Looks like a nice drop today, lets see where it ends up. I still think 22k or 23k and grind around for sometime before it resumes its climb. That was a very swift drop for it rise and go as if nothing happened. Lets see.

I think we could drop to 21k area even into the 20’s

Steel and Aluminium tariffs announced today, because it's ridiculous how much a nation with so much material abundance that used to make ludicrous amounts of the stuff at home, imports from abroad, many of whom dump like crazy with subsidized production costs behind it.

Some of the Fugitive Traitors ("Free Traders") drove the market down 500pts, but no biggie.

TwoScoopsPlissken says

Steel and Aluminium tariffs announced today, because it's ridiculous how much a nation with so much material abundance that used to make ludicrous amounts of the stuff at home, imports from abroad, many of whom dump like crazy with subsidized production costs behind it.

Some of the Fugitive Traitors ("Free Traders") drove the market down 500pts, but no biggie.

I am definitely glad he is finally doing things on trade that nobody has done in decades. But market wise, just thinking it might go down and form a new base, before taking off again.

lostand confused says

just thinking it might go down and form a new base, before taking off again.

I also think that this is a buying opportunity. Have no fucking idea what to buy though.

For the record:

https://www.wsj.com/articles/u-s-imposes-266-duty-on-some-chinese-steel-imports-1456878180

Its been 2 years since the last tariff was slapped on Chinese steel imports.

Booger says

Have no fucking idea what to buy though.

Persian Red Saffron?

Over half of it's peak value, will drop to around 10,000 this year.

Interesting-looks like it is coming down to the 22k level-but some pretty fast drops. Wonder if it will recover fast or push sub 20??

Lots of bad news: Facebook Drama, Crashing AI Cars, and of course the CoC Suckers aren't happy with protecting US IP and balancing the Trade Deficit against high Chinese Tariffs (and other measures).

I think there will be a big snap back but the chances of breaching 20k definitely have surpassed the chances of 30K. At least in terms of volatility 2018 predictions have been proven right, almost anybody I think predicted volatile markets. 2017 and below were volatility snooze-fests.

Sadly, the market is now only up 25% since Trump won, versus being flat the last two years of Obama (after his "recovery").

I'm crushed.

Malcolm says

If people insist on overpaying for stocks, like they are with houses, please don't expect any sympathy.

@Malcolm I totally agree. Stocks and houses both have underlying values which are not that hard to estimate. If you pay more than that underlying value, you're merely guessing, not really investing.

The value of a stock is in its earnings (hopefully reflected in dividends).
The value of a house is in what you could rent it out for. Or put another way, how much rent you can save.

The calculations can get complex when you try to take all the details into account, but the fact remains that earnings determine value for both stocks and houses.

I'm not going to try to predict the Dow, I'm just going to hold my good-value stocks, and maybe buy more of them. As Saint Warren likes to say, when the market drops, that just means that stocks are on sale and there are bargains to be had.

Patrick says

The value of a house is in what you could rent it out for. Or put another way, how much rent you can save.

What about shelter for your family? Doesn't that value count?

Renting gets you shelter just like buying does.

The big question is the cost.

Patrick says

Renting gets you shelter just like buying does.

The big question is the cost.

I believe cost is only one part of the puzzle. After being a home owner for decades, I tried renting for a few years to let the housing collapse level out. Renting sucked. Yes, it was cheaper, but not worth it in the big picture.

Having been on both sides, I rather spend a little bit more not to have to deal with a landlord, and be able to do what I want to the property. I rather deal with the bank (mortgage) then be at the whim of a landlord. At least I know I'm here long term, as long as I send the mortgage check, and the bank will never show up to nose around like a landlord will. Plus, I don't have to worry about a landlord stiffing the bank and not pay HIS mortgage, only to have the Sherriff show up to throw us out for eviction, or have to worry about being kicked out at the end of the lease.

Peace of mind has a cost, and I'm will to pay extra for it. Plus, I don't have any kids living at home. If I had little kids, the last thing I would want to do is move them when the lease expired.

Yes, not having to move is worth something, but how much? There is some number.

Patrick says

Yes, not having to move is worth something, but how much? There is some number.

So what's your number?

For me, not having to deal with a landlord and being able to do what I want with my house, the number was about $20K - $22K, and my mortgage payment was the same as my rent payment.

Plus, I get to deduct property tax and the MID (which I couldn't do as a renter, saving me income taxes in April), so on a monthly basis, I come out ahead (and I get a forced savings account with the equity portion). With rent payments, the whole payment was vaporized and I got zero economic benefit, except for shelter.

Actually, I didn't tie up a lot of money on putting down a big down payment, so actually my investment growth covered the mortgage interest and then some, and keeps me more liquid, instead of locking money into the house, which would be more difficult to extract, if needed.

Being on both sides of the equation, owning is by far better than renting, and we haven't had hardly any appreciation in home prices (like in your area) and it's still way more beneficial.