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Latest Comments120 Comments
How Wall Street Has Failed the Individual Investor
I know that's difficult to accept, but by now everybody has learned how easy it is to lose when all you are doing is "hopin' and prayin"
General Electric: Genuine Risk of Collapse?
This is not the time to be brave, but time to preserve capital and fight again another day.
On Nov 18 08:26 AM Help me please wrote:
> Hello! My mom used to own $1,000,000 of GE stock, and now down around
> the worth of $300,000. She won't sell because she thinks it would
> be a waste. Won't it eventually go up in the next ten years. Do you
> recommend to sell at such a loss? I'm worried. Comments?
Hedge Funds Suffering in the Background
They need better risk managment and better hedging strategies. If they aren't or can't hedge, they should avoid the asset. Simple hedging strategies are avialable to every retail investor, and all of those plus greatly increased complex and sophisticated hedging is amply available to the large hedge funds.
Here are just a few: If you are long stocks, buy Put options on individual stocks or ETF's or indexes; short the eMini's for greater leverage; short a comparable basket of stocks or ETF's in a margin account.
Though it is very difficult to find a perfect hedge, the tools are available in the equity markets. It takes better skills and experience than mine to hedge fixed income or private equity.
Remember, these are supposed to be "hedge" funds. That is one of their selling points and a primary reason that institutional investors buy them.
The Most Dangerous Place to Get Investing Advice
The example cited, Cisco, has been selling routers forever. At the top, it had a P/E of 132:1, a market cap of 543 billion and sales of 12 billion.
Today, the P/E is 10.5, it has sales of 39.5 billion and a market cap of 104 billion.
The stock price today, around $17, is the same as it was in November, 1998. Cisco has never paid a dividend.
If I am a long-term investor, could somone please tell me why I should be interested in buying Cisco today? Will the E of the P/E continue to increase, will the P/E ration expand, will they sell more routers, will management continue to perform, etc. etc.
If Cisco can double, why can't it be cut in half? Last question: how many products, companies, financial statements, management qualifications, etc. can the author be an expert on?
Don't you see that this is the same sales pitch that every mutual fund manager, private equity manager, etc always make. These fundamental approaches are 99% of the way its sold in the professional marketplace. Only 1% of investors rely solely on technical analysis. I don't have it in front of me, but I would guess that the vast majority of the Fortune 400 have made their money in private businesses that later went public, in leveraged real estate or some form of commodity business such as oil.
There will be very few professional money managers in the 400. Maybe a while ago, but not today.
Wednesday Outlook: Staying on the Sidelines
The Dangers of Timing the Market
Statistically, half of the top quartile funds in one year or five year period will fall into the bottom quartile over the next measurement period. And, of course, the inverse is true that half of the bottom quartile funds will end up in the top half over the future period. Investors tend to be in active funds rather than the index funds, since those are the ones that their advisors recommend, they are always chasing the top performers, which are naturally going to be underperformers in the future.
Active mutual funds investors' returns are approximately half the market returns because of this chasing plus the layers of fees inbedded in the funds and the overlay of advisory fees.
How Low the S&P 500 Could Go
Decades of Negative Returns: A Long-Term Look at the Dow
Some day far down the path when you are old and broke, you will lament; "If only I'd gone short in 2008".
Reading the S&P 500's Crashing Waves
Not only has the EWI Financial Forecast generally been right about the wave count (though it is by design backward looking) and the relationships about wave segments, it has damn sure saved my financial bacon in the stock market. Keep in mind that the waves of buying and selling are the psychological expressions of the mass public. The stock market is their mirror and at this time in history it is expressing fear and loathing of stocks, commodities, bonds (except treasuries) and flight to safety.
The author of this article clearly explains the current status of the market and the wave count. He describes waves 4 and 5 and what they will likely lead to. However, he is not painting the entire picture. The 5th wave he is illustrating will not be the end of the c wave. We are currently in the 3rd Minute wave of Intermediate wave (3) of Primary wave 1 of Cycle wave c.
This implies, if correct, that there are two more waves remaining of Intermediate wave (3), to be followed by Intermediate waves (4) and (5). Following those, next to come will be Primary waves 2-5, each with its own sub-sets of 5 Intermediate waves and each Intermediate wave with its own subset of 5 Minute waves.
Once Primary wave 5 is complete, Cycle wave c will be over. By that time (several years), the stock market could be back to the levels of 1974, the previous Grand Supercycle wave IV. Somewhere in the vicinity of 400 on the Dow.
Will it work out like this? Nobody knows, of course. But the unthinkable is happening around the world right now. Nobody would have predicted 40% off the market a year ago either. Nobody would have predicted the failure of virtually all the 100 year old investment banks, AIG, Freddie and Fannie and on and on.
When GM, Ford, municipalities and states are declaring insolvency and the Federal government finally realizes that it does not have the power (brain or financial) to put it all back together again, we will be living in a much different world.
Cash and short funds have been the best investment recently. Cash has beat everything else over the past 10 years. It is still king.
What's an Investor to Do - Patience or Panic?
Thus, it is a natural thing to do and nothing to get worked up about. Get out, sit in cash for a while and see how much better it feels. If the investor has a long time frame, he also has some extra time to reassess his risk tolerance (he may have just learned something about himself that he didn't previousl know). He can always reenter the market, since it is going to be down quite a bit anyhow.
In other words, don't be stupid. Listen to your instincts and they will serve you well. If you don't trust them, just hire a nice stock broker.
Trading During This Crisis
My head is lying across the room in the basket, having been handed to me several times. I'm retreating to neutral for the balance of the day and keeping my finger off the button. Hopefully, we limp in with only four digit losses. Right now, its not looking too promising.
Time To Go Long, For A Short Time?
I don't know. Who would have imagined 10 years ago that an investor would have been fortunate to be a break-even on his Vanguard 500 Index fund in the next 10?
Can anybody ever think the unthinkable?
Opportunity in Emerging Markets Amidst This Panic
On the other hand, when man is hunting for game he applies patience, cunning, stealth and a small group with killing tools. He knows better than to charge in the direction of his prey. As he becomes better equipped to kill, many gain complacency and the highly skilled begin to supply others with meat as they become dependent on his hand-outs.
But those who became complacent and dependent lacked survival skills. They were out of shape and couldn't escape.
Sound familiar? It should, because we are seeing it play out today in our citizens who are sitting on their portfolios and 401-k's like deer in the headlights. "It'll come back" is the refrain. Don't panic. Diversify. etc.
By the time this decline accelerates down past the 8500 level, true panic and the herding instinct will set in. But it will be too late for many. They left too much of the decision making up to others and had let any skill in it that they should have acquired before investing wither away. All they have left now is either indecision or panic.
The Real Reasons Fertilizer Stocks Are In the Dirt
Fooling Around a Financial Black Hole
The market is much, much bigger and stronger than any government or combinations of of worldwide government. The government might as well issue regualtions that prevent selling on a down-tick.