Down goes the Dow

Ghost of Igloi wrote:

Sally V,

You did author the "chicken little" comment. How do you expect me to react?

Igy

I'd hope you realized that you were over reacting.

coach and agip,

OK, I am old, pessimistic, have confirmation bias, and cherry pick data. I can do simple math. Before today, previous 52 weeks earnings for AMZN was $0.89 per share, so we go from $0.19 this quarter to $2.87 over the next year. Wall Street is selling hocum. By the way, AMZN was $35 in November of 2008 and under $300 earlier this year. AMZN has no PE. NO company has sustained a PE of over 100.

In the end, math and stock valuation will determine the direction of this market. A stock's value is only equal to its ability to deliver sustainable earnings. It is not my theory, it is finance.

If one has the ability to ride the wave, I wish you well. I am not that smart. I will give myself some credit however, because something stinks about this market, and gives me caution. The tide will roll out and there will be plenty of naked investors.

Igy

You're doing it again. You're using Amazon as a proxy for the entire market.

Is this the strategy you use with the people whose money you invest?

Sally V,

It is a tendency one gets when you are old, pessimistic, have confirmation bias, and cherry pick data. I will endeavor to improve my behavior.

Igy

Sally V,

No, it is a symptom of a speculative market. On Friday, Google's market cap jump equaled the market cap of Caterpillar, in one trading session. At the same time commodities are collapsing. There is a wide divergence of performance of investments, and it is not anywhere close to normal. If you feel differently, I have nothing to add.

Igy

Ghost of Igloi wrote:

Sally V,

No, it is a symptom of a speculative market. On Friday, Google's market cap jump equaled the market cap of Caterpillar, in one trading session. At the same time commodities are collapsing. There is a wide divergence of performance of investments, and it is not anywhere close to normal. If you feel differently, I have nothing to add.

Igy

Wouldn't that be nice!

Sally V,

0

Ghost of Igloi wrote:

Sally V,

0

So that's your nothing?

Try to keep it a bit more brief. For example, try keeping your nothing to nothing.

The troll is at it again. My last post was at 8:46 PM.

More AMZN thoughts....

1) Most of the earnings growth was from Cloud hostings business not retail.

2) Using the most optimistic earnings projections the stock would trade well above 200 times earnings at the current price.

3) Wall Street analysts, after the fact, are dramatically raising price targets many at $650.

4) For the stock to trade at a valuation equivalent to Wal Mart, the stock would trade under $20.

None of that means you can't make money with Amazon. I sold some last year for a tidy profit.

Ghost of Igloi wrote:

coach and agip,

In the end, math and stock valuation will determine the direction of this market. A stock's value is only equal to its ability to deliver sustainable earnings. It is not my theory, it is finance.

Igy

Ghost of Igloi,

Someone somewhere probably every day since at least the 1970s has said what you just typed. And for more recent times, if you go back to 2009, LOTS of people were saying that. The amount of money that people who stayed in the market and have continued to contribute have made since 2009 is almost unreal. I know, you or someone else will say The Fed artificially pumped up the market. Well, it's always something that does. This group, this situation, this bubble, and on and on and on.

The fact of the matter is that the market has gone up 73% of calendar years since the very beginning, and the overall trend is UP. There is no reason to believe that that trend will change in the foreseeable future.

flagpole,

On the otherhand, there will be many individuals that have no understanding of valuation and they will buy AMZN or the market at these levels. They will also sell the same AMZN or market at the next cyclical low.

Igy

The syllogism to that statement is:

None of that means you can't lose money with Amazon. Many will do so at a large loss.

Ghost of Igloi wrote:

flagpole,

On the otherhand, there will be many individuals that have no understanding of valuation and they will buy AMZN or the market at these levels. They will also sell the same AMZN or market at the next cyclical low.

Igy

Individual stocks are risky, and people need to understand that going in. Jim Cramer's advice on individual stocks is solid:

1) Invest in retirement funds in mutual funds first.

2) Use "Mad Money" (money beyond what is earmarked for retirement and other things) to invest in individual stocks.

3) Never buy fewer than 5 individual stocks.

4) Never put more than ~20% into any one sector of the market.

5) Plan to spend an hour per week per stock on research on whether to buy, sell, or hold that stock.

flagpole,

It would be nice if people would follow that advice. I would assume it is a small number of small investors. I imagine most people use his show to buy the hype of the day be it his or some guest. The companies that advertise on his show have much to gain from the legions of trading muppets. Same can be said for Fast Money. Very poor advice is given for the majority of individuals.

Igy

flagpole,

Your assumptions are based on the belief that the future will perform like the past. Isn't that the opposite of what most investment disclaimers carry? Also, the 1970s, the era prior to Greenspan as Fed Chair, is totally different in so many ways and not for the better. I think it is incredibly naive for one to beliieve that debt can be multiplied into the future without a bad ending. One can choose to ignore Detroit, Illinois, Puerto Rico, Greece or China. Or one perceives an environment that is changing right before our eyes. Add to that list non-GAAP accounting, record stock buy backs and record stock/bond valuations. Commodities and emerging markets are collapsing as the policies of central banks reach the end game. If you think the last 15 years of 4% equity gains will suddenly return to the double digits gains of the 1990s, well think again.

Igy

Ghost of Igloi wrote:

flagpole,

It would be nice if people would follow that advice. I would assume it is a small number of small investors. I imagine most people use his show to buy the hype of the day be it his or some guest. The companies that advertise on his show have much to gain from the legions of trading muppets. Same can be said for Fast Money. Very poor advice is given for the majority of individuals.

Igy

Well, shame on people for not fully understanding what Cramer is telling them.

Again, what you wrote there could have been written by anyone on any day from the 1970s on, substituting some names of people and places and dates. In 1979 Businessweek had the article "The Death of Equities", and we have been told time and time again that stocks are not going to perform as they have (and I don't PLAN that they will), but then they find a way to do so. 1987, 1991, DOT COM bust, 2007-2009 crash, and since and before and in between.

Mutual funds have gained on average about 11% since inception which is right on what I have averaged yearly since 1989 when I started investing. I have a spreadsheet that projects earnings, and I have columns from 0% to 9%, so I don't even entertain 10% or 11% or more (even though history tells me I definitely could). So, I'm not PLANNING to get what I have gotten. The thing is though, so far I always expect a conservative return and over time I have always done better than I conservatively planned. Until there is a HUGE change in the way the US does business, there is no reason to expect a big change from what has happened. Companies still drive profits and value, and that is not likely to stop.