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Old 11-20-2007, 06:45 PM   #61
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The housing industry is demolished. Look at USG, look at OC, and look at high quality lenders like Wells Fargo and USB. Look at the US land drilling industry, scraping along in many cases at multiyear lows. There may not be any obvious reasons why any of this should change anytime soon, but so what? We are buying stock, not options. The prices of homes is in reverse, why is there any need to buy before a bottom is obvious? If the trend reverses it will be for multiyears not for a short period of time. Banks in times of stress can fall some incrediible percentages, I even like Wells Fargo of the banks but until all the bad loans finish I am willing to let prices recover and lose the early gains rather than risk a 50 percent loss. ONe good sign though was a new low today on many financials that was reversed at the end of the day. Should that low hold over the coming month I would take that as a good sign for the banks, but it is still way too early to judge that.

Look at the major drug makers-Pfizer is yielding 5%, and though it may not have visibly bright prospects, this is one of those black swan businesses and here we would be entering very cheaply. Pfizer is coming off of patents and will have a loss of patent protection on 18of 48 billion of their sales. Pfizer in the meantime is pouring money into research and buying their own stock back. Right now the dividend is 57% of earnings and historically Pfizer has paid 33% of earnings. Future growth prospect of the dividend is subpar. Price will depend on whether Pfizer has blockbuster drugs come out of research. So I do not think the stock is cheap - it is a play on whether you have confidence in the new management. Earnings growth by Value Line is estimated to be only 2 percent over the next five years so you have a PE of 12 which reflects those limited growth prospects.


.Look at retail- many of these outfits have some real warts, but they are pretty cheap- including companies like Wal-Mart and Target. Walmart at a PE of 14.7 and growth prospects on dividends and earnings of 10 percent is a decent investment but not a dirt cheap one, certainly the best in my mind of all mentioned so far. Target as recently as October was up 15 percent on the year and now they are announcing weak sales on their high-margin items. Now they are planning on borrowing money to buy up to 10 billion in stock back. A horrible strategy in my mind how does that help their business? It only helps their option holders in the management ranks. Since the stock has just very recently disappointed and is only off a small percentage from the start of the year I do not see this stock at all as a compelling once in a decade type of stock.

So I feel like the high flyers have a lot of falling to do, but not so some of these others. It is analysis intensive though.

I know I would far rather own well chosen stocks today than long term governments or any bonds. I think many stocks are also more attractive than most commodities and certainly gold.

Even if the US is going to hell in a hand-basket, there will be lots of viable businesses serving the hell and hand-basket space.

Ha
While many may feel as if stocks have fallen a long way the truth is they are in total flat on the year, that does not make a once in a decade opportunity, you would have to ask yourself has this year progressed in such a manner as to make me think the value of stocks have soared from 12 months ago and now represent a bargain not seen in over 10 years? I think it has been so long since we have had a true bear market that small declines become expanded in importance.
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Old 11-20-2007, 06:50 PM   #62
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When I worry about a bear market, I'm not talking about the current drop. That's just a "correction" based on new information about losses.

A bear is the opposite of a bull. With a bull, we get speculative gains above what fair value would dictate. A bear is when stocks are depressed below their fair value.

We haven't seen a bear market in a *long* time. Even during the 2000-2003 drop, P/E values were still high, and stocks were not generally cheap based on current earnings.
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Old 11-20-2007, 07:02 PM   #63
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While many may feel as if stocks have fallen a long way the truth is they are in total flat on the year, that does not make a once in a decade opportunity, you would have to ask yourself has this year progressed in such a manner as to make me think the value of stocks have soared from 12 months ago and now represent a bargain not seen in over 10 years? I think it has been so long since we have had a true bear market that small declines become expanded in importance.
You make a lot of good points. I don't think anyone is trying to say that "stocks" are now a once in a decade pportunity; at least I am not. However, compared to a lot of other investment possibilities some sub-groups seem to me at least to be very reasonable bets.

Ha
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Old 11-20-2007, 07:14 PM   #64
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When I worry about a bear market, I'm not talking about the current drop. That's just a "correction" based on new information about losses.

A bear is the opposite of a bull. With a bull, we get speculative gains above what fair value would dictate. A bear is when stocks are depressed below their fair value.

We haven't seen a bear market in a *long* time. Even during the 2000-2003 drop, P/E values were still high, and stocks were not generally cheap based on current earnings.
Some were very cheap even in 2000. I bought UST yielding 10%, MO somewhat less and I don't remember exactly. When interest rates are low, you are not going to find cheap stocks without warts. Back then the warts on tobacco stocks were lawsuits. Much of this is still around, it's just that now they aren't considered warts, just very minor blemishes.

You may be right with your macro thesis. In general I have usually been wrong when I passed up what looked like solid buys because I had some overview. But then, having an overview that is out of synch with current prices, and being right, is a great way to make a lot of money.

Ha
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Old 11-20-2007, 07:18 PM   #65
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It's not a thesis. I just need to ensure that I stay retired if it happens. That's what attracted me to the bond-first approach.

Sounds like you're basically looking for Buffett-style "cigar butts." I do sort of the same thing with a value tilt. At least, I hope the results are the same.
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Old 11-20-2007, 09:50 PM   #66
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Yeah, i'm not seeing a lot of bargains in general, or even in the majority. Stuffs pretty much slacked back to where it was last year or earlier this year. The stuff thats in the vicinity of cheap looks a little scary.

I guess the real bargains are the ones where you held your nose and sucked them up.

Except for when they really did stink.

You're right Twad, there aint a lot of room when you're starting at 4%. Unless you go to 1%. Or -5%.
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Old 11-20-2007, 10:29 PM   #67
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Ok, after skimming this thread, I realize I must be pretty damn boring....I just keep investing a certain amount every month into target funds - I calculate and manage my lifestyle costs and frankly hope to be able to have a 3% to 4% withdrawal rate as well as my pension(s) and spouse's pension cover the lifestyle costs....and that's not even looking at the tax deferred investments - that 1966 to 1996 stretch looks scary, though.

Off topic - CFB, you sure cleaned up the quip on your avatar - or the one my girlfriend has has quite a different message! She's got a large one framed in her kitchen :-)
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Old 11-20-2007, 11:52 PM   #68
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Actually my avatar is the original, although I've seen the one you're thinking of once or twice, which was made from this authentic wartime poster.

And some folks thought I was being too subtle...

You're thinking of this?
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Old 11-21-2007, 08:56 AM   #69
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Yeah, i'm not seeing a lot of bargains in general, or even in the majority. Stuffs pretty much slacked back to where it was last year or earlier this year. The stuff thats in the vicinity of cheap looks a little scary.
The stuff that's cheap and "scary" is the stuff that still has a large cloud of uncertainty over it. We're getting to the time when Buffett-style investors start looking at distressed sectors and looking to load up on "best of breed" in those sectors. Meanwhile, my FIRE clock moves back another minute as I've lost nearly another year of withdrawals on paper over the last couple weeks. Tick, tock...
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Old 11-21-2007, 03:08 PM   #70
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You rang?
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