BTW, it was not solely because of valuations, or price, that I exited at that point--it was because of my assessment of HOW and WHY the prices got to that point. QE and margin were for me the 2 things that illuminated the price. If there had been no QE, and if margin were under control, I would have stayed in, likely to this day.
Maserati wrote:
That was an attempt at answering your initial question Igy, in a more long-winded but far less cryptic manner than Big Dog's attempt.
Illustration: consider coach d's statement "Why would I want to sell a stock that is up 140% this year?"
My personal answer would be that that is PRECISELY WHY I WOULD want to sell that stock. coach d is OK, but he's self-referential. He has absolutely no idea what Icahn did with the proceeds of the sale. He could easily have received more value in the interim than he missed out on, even if he just spent it on purchasing a yacht. Alternatively, he could have transferred it to another, better-performing investment, upon which he may or may not have yet realized a return.
Same as my having gotten out at 16.5k. I have realized far more value than I have missed out on, in the interim. That insane 30+% year was PRECISELY WHY I chose to exit at that time.
statistically, stocks that are up a lot tend to keep rising
momentum is one of the only proven investment strategies
"statistically, stocks that are up a lot tend to keep rising"
Yes, I know. And the last year's gain wouldn't matter one bit, especially considering the long period of the rise since, for instance, 2009 when coach d bought it.
agip and Maserati,
CSCO was $82 in March 2000, $27 today.
AIG was $1,173 in June 2007, $62 today.
I would not assume the environment today to be the environment of next year. What happened to many of the hot stocks of 2014, think Micron for a minute, over 50% lower.
I guess valuation does matter, especially over longer time horizons.
Igy
agip,
The clumsy point I was trying to make was the energy sector can't be isolated from the larger whole. From FactSet:" It is important to note that the Energy sector is projected to be the largest contributor to the estimated earnings and revenue declines for the fourth quarter and for all of 2015." Largest contributor and only contributor are two different things. My sense is that energy is a symptom of slowing growth, and bankruptcies in that sector will spread to other sectors like the financials.
The problem with much of FactSet is they use operating rather than reported earnings. It is a convenient and often quoted Wall Street source.
Igy
Ghost of Igloi wrote:
The belief of investors is that Amazon and Netflix continue to expand their revenue exponentially.
Igy
If you can link me to proof of one - just one - investor claiming a belief that revenue for either of those companies will expand exponentially, I will kneel down and kiss your feet. Otherwise I will have to join with those here who accuse you of being over the top.
Big Dog Investments wrote:
Ghost of Igloi wrote:The belief of investors is that Amazon and Netflix continue to expand their revenue exponentially.
Igy
If you can link me to proof of one - just one - investor claiming a belief that revenue for either of those companies will expand exponentially, I will kneel down and kiss your feet. Otherwise I will have to join with those here who accuse you of being over the top.
I'll call you on this one, BDI - Igy used the word in an inexact but appropriate manner.
see definition #3 below.
ex•po•nen•tial (ˌɛk spəˈnɛn ʃəl)
adj.
1. of or pertaining to an exponent.
2.
a. of or pertaining to the constant e.
b. (of an equation) having one or more unknown variables in one or more exponents.
3. rising or expanding at a steady and usu. rapid rate: exponential increases in manufacturing costs.
n.
4.
a. the constant e raised to the power equal to a given expression, as e3x, which is the exponential of 3 x.
b. any positive constant raised to a power.
Big,
OK, but investors are overly optimistic.
Perhaps you are too.
Igy
agip,
Thanks, I should have grab my Websters.
Igy
My mathematics training got the better of me there.
agip,
Back to oil. In 1985 I was the head Track Coach at Texas A&I University in Kingsville, Texas. Oil took a hit and naturally the track program became a focus of budget cuts. In Texas the Permanent Education Fund extracts a percentage of oil revenue that is used in educational funding. The fall in oil can have a dramatic effect even on our beloved sport.
Igy
I believe this thread just jumped the shark.
POTO,
You will have to splain your analogy to someone older than thirty.
Igy
actually the phrase was coined in 1985 so no excuses
agip.
Well in answer to POTO: "What Me Worry."
He can look that up on Wikipedia.
Igy
POTO
What me worry?
The stock market commentary appears appropriate to me:
http://www.urbandictionary.com/define.php?term=what+me+worry
Igy
No need for the explanation, Igy. Thanks anyway.
Ghost of Igloi wrote:
Big,
OK, but investors are overly optimistic.
Perhaps you are too.
Igy
Perhaps you are overly pessimistic.
The record of small annual moves in the last few decades is that a big move follows in the next year.
Year S&P return Following Year
1981 -4.70% 20.42%
1987 5.81% 16.54%
1990 -3.06% 30.23%
1994 1.33% 37.20%
2005 4.83% 15.61%
2007 5.48% -36.55%
2011 2.10% 15.89%
average return: 14.19%
average move (absolute value) 24.63%
http://finance.yahoo.com/news/p-flat-usually-leads-huge-151200822.html;_ylt=AwrXnCGtOoNWZiwAzxfQtDMD;_ylu=X3oDMTBzdmVvZmlwBGNvbG8DZ3ExBHBvcwMxMAR2dGlkAwRzZWMDc3I-
Big move coming next year.
coach d,
Skepticism comes with age. I have been at this long enough to see a pattern of narrowing speculation. You may have no interest in the broader market, but that is the pool you swim in. The equally weighted S&P 500 ex-dividends is down 3.5% for the year, Dow ex-dividends down 2%. Some speculators (hedge fund performance points out the winners and loser) are making a killing, but investors are picking up pennies in front of a steamroller.
Igy
Since dividends are part of the equity investment universe, any discussion of gains/losses should include them to give the most accurate picture.