Record Dow! Whee!

[W2R]

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Originally Posted by Dawg52 True. If we thought stocks only go up, we wouldn't put any money in bonds, commodities, etc... I think most on here hedge our bets. Now, time for a mid afternoon glass of wine for this rainy day. Hey, whatever happened to Cut?

If I had thought that stocks only go up, I would never have started this thread! I thought it was pretty cool when the Dow went over 14,000 and wasn't really expecting it.

It's raining down here, too, lots and lots. No wine for me since I don't drink, but I'll toast the afternoon with a glass of reconstituted powdered milk. Now THAT should make most of our readers shudder!

[Dawg52]

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Originally Posted by Want2retire No wine for me since I don't drink, but I'll toast the afternoon with a glass of reconstituted powdered milk. Now THAT should make most of our readers shudder!

Including me.

[FIREd]

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Originally Posted by Dawg52 True. If we thought stocks only go up, we wouldn't put any money in bonds, commodities, etc... I think most on here hedge our bets.

Exactly! We hope stocks will keep going up, but most of us structure our portfolio in case they don't...

[Moemg]

You mean they might not go up ! Oh crap ,I'll have to get those nurses clogs out of the goodwill box !

[Nords]

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Originally Posted by Want2retire If I had thought that stocks only go up, I would never have started this thread! I thought it was pretty cool when the Dow went over 14,000 and wasn't really expecting it.

Never fear, I suspect we'll have several more opportunities to celebrate the Dow advancing into 14,000 territory.

Heck, we might even have a couple chances to celebrate it moving into 13,000 territory.

I'm not holding my breath for the 15,000 party. Maybe Harry Dent will come out with a special line of decorations & goodie bags?

As for the "stocks always go up" fallacy, that's my fault. I've only been watching since 1982 and it seems that's all they've done since then... if I'd paid any attention to the economy and the stock market I never would've had the Chicken Little blissful ignorance to retire in June 2002.

Have you ever noticed that the doom & gloomers never tell you what stocks they're shorting? What good is that?

[brewer12345]

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Originally Posted by Nords Have you ever noticed that the doom & gloomers never tell you what stocks they're shorting? What good is that?

Oh, it is even better when they do. Its usually a nice indicator of the location of the next Gawdawful short squeeze.

[twaddle]

Shorting is for fools who don't understand the concept of unlimited downside risk.

Puts on XHB all the way, baby!

[unclemick]

Hmmm - you folks do know that balanced index rebalances automatically - in case you're distracted by football or some other frivolous pursuit.

53 degree's with some rain expected in Missoula - in case someone wants to know.



heh heh heh -

[trixs]

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Originally Posted by Nords Have you ever noticed that the doom & gloomers never tell you what stocks they're shorting? What good is that?

So who is going to short google? Its currently trading at 650 with a 50PE.. Can it keep growing at 30%+++ even though it has 90% of the market share already?

[clifp]

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Originally Posted by trixs So who is going to short google? Its currently trading at 650 with a 50PE.. Can it keep growing at 30%+++ even though it has 90% of the market share already?

I shorted AOL and AMZN during 98 and 99. I learned my lesson, the volume of bubbles expands exponentially before exploding. Frankly in GOOGs case, I am not sure the stock is overvalued.

The folks at Google are smart, scary smart. Of the scores of Teaching Assistant I had at college, I remember only two the really cute girl teaching German, and Google CEO Eric Schmidt who was the TA for Operating systems.

Years later, while at Sun, Eric gave a talk to at Intel. He impressed everybody, and I was flatter that he remembered me. I told Andy Grove, that he should hire Eric, Andy said he'd be expensive, and I said it won't matter. I hear that Eric isn't even in the top 5 in brains in the company.

I just noticed that one of my sharpest colleagues, an Intel Fellow, is working for Google Analytics... At some point somebody will make money shorting Google, but it won't be me. I think you can still lose at lot betting against them.

[Spanky]

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Frankly in GOOGs case, I am not sure the stock is overvalued.

By what means or criteria do you use to arrive at that conclusion?

[twaddle]

I think we need a new valuation metric for GOOG. Eyeballs are so 1999, so let's go with brainpower.

GOOG has 13,786 employees. If we assume that each GOOG employee is worth $15 million, we can justify their $200 billion market cap. Just imagine that every GOOG employee is equivalent to a super sports star, and it's easy to justify their current valuation.

BTW, no way I would short them. Beware the "fourth factor" that Fama and French never told you about: momentum.

[clifp]

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Originally Posted by Spanky By what means or criteria do you use to arrive at that conclusion?

Well it has PEG of 1.0 and PEG payback period of 7.6 year both of which are slightly below the industry average.

To be honest I can't justify the price. Perhaps 300 with PE of 25-30. However, it is my view that GOOG is this centuries Microsoft. I bought Microsoft several times in the 80s an early 90s and made a nice profit but it always made me nervous. But betting against Microsoft was almost always a bad bet until GOOG has come along.

For me GOOG is sidelines stock, I root for them to pass a $1,000 but I won't be surprise to wake up some day I find there are back down to $100

[Spanky]

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but I won't be surprise to wake up some day I find there are back down to $100

That's a scary thought .. However, it might be the stock splits 10x.

[Razor]

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Originally Posted by Nords Geez, you're right and the sky really is falling. It's amazing how all the blissfully ignorant have survived this long. An economy based on "consumerism". What the #$%^ else would an economy be based on? I'm not even going to touch that "unchartered waters" comment, although I suspect that the 20th century affords ample precedent for your assessment of the world's ability to survive your other dire reporting. Luckily the Plunge Protection Team is taking care of us all today, and we can't even tell... Keep posting those economic summaries, because without them we wouldn't have a wailing wall of worry to gather around. I'm going to keep sniffing around for 75-cent dollar bills under the flashing-blue-light-specials, the ones where the crowds are running away screaming from the "On Sale Now!" signs. Doesn't seem like much consumerism in action there.

[MODERATOR EDIT]. You must first know what consumerism means. Look it up, but simply put, it means people buying things they don't need. That can of Coke, 6 dollar coffee, the Iphone, a Hummer, that boat that sits in the driveway all summer, a big house full of junk that they can't afford. Americans are materialistic spenders and spending drives this economy. Other countries have different things driving their economies. Some under developed countries economies are still based on agriculture, some totally depend on tourism, some economies like China are driven by using cheap labor to manufacture goods for export, there are countries that prosper by providing financial services to other countries and of course can you guess what drives the economies of Arab oil producing and exporting countries? You are right if you you said oil exports. Now you're getting it. Not all economies are like ours.

What the hell else are economies based on? I hope this give you a little understanding so you don't appear to be so ignorant the next time you post.

[Delawaredave5]

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Originally Posted by Razor What the hell else are economies based on? I hope this give you a little understanding so you don't appear to be so ignorant the next time you post.

That wasn't nice ! Usually this board doesn't get this pissy.

There's a economics concept called "Comparative Advantage" - successful countries focus on what they do best in the world.

You could argue that the US understands comparative advantage better than any other nation - where the US focuses on innovation and services and leverages "making stuff" to low cost countries. This approach has rewarded the USA with "a lotta stuff" and a great standard of living.

The other argument is that we've "gone overboard" and "hollowed out" the value adding portions of our economy outsourcing stuff - and it will come back and "bite us in the a__". In addition, we've borrowed from the future through debt.

Stephen Roach is well respected guy, albeit a little too "permabear" to me. There's an interesting article by Roach on Mauldin's site (another permabear). He talks about it being "game over" for the American Consumer - real earnings stalled and no asset inflation (houses) to sustain the consumption. Here's link:

InvestorsInsight : John Mauldin's Outside the Box

But let's be nice........

[brewer12345]

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Originally Posted by Delawaredave5 That wasn't nice ! Usually this board doesn't get this pissy.

The funniest thing about it is that I am pretty sure Nords already has Razor on ignore, so this likely had the effect of throwing a meringue into a black hole.

[chinaco]

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Originally Posted by Razor ... You must first know what consumerism means. Look it up, but simply put, it means people buying things they don't need. ...

I am pretty sure the term can have slightly different meanings depending on the context in which it is used...

Look it up... But "Don't Taze me Bro"

[ladelfina]

I don't know if I am bearish like Razor (I don't invest like it), but I think he has some good points. Like ha & others I wish he wouldn't use such arrogant language as it detracts from the matter at hand. Saracasm => fun; surliness => not so fun. Brewer is one of my favorite posters; I think he's got a quick mind and no doubt partly because he's young. When you get older you tend to get into mental "ruts".

I kinda see both sides. I don't think America will be outright hitting the skids for a while. I don't see immigration as a big deal; the majority of immigrants help grow the economy more than a minority may drag it down. They add to the younger, striving "consuming" generation!

OTOH I like to look at the bigger picture with philosophy. Just off the top of my head, who were the world's economic powerhouses in the 15th-16th century? Spain? Venice? In the 17th? the Dutch? In the 18th? (boh? Europeans of one stripe or another) The 19th? The British. The 20th? The USA. The sun has set on the British empire. It did on the Roman Empire, and one day it will on the American Empire.

Watching the History Channel I came across a show about Shanghai. What American thinks about Shanghai except for knowing it as a synonym for kidnapping? But in the 1920s and 30s it was the economic equivalent of maybe Hong Kong in the 80s with HUGE amounts of investment money coming in -the 3rd largest financial center in the world after London and NY- plus the added interest of no passports needed, the major point of opium distribution, big-time gangsters and prostitution, etc. Mix a "Wild West"-type boomtown/gold rush with City bankers and Al Capone for good measure. Shanghai today is a shell of its former self.. (but is still the eighth-largest city in the world, with the largest cargo port).

Who knows where the currents of history are taking us?


I like Delaware dave's post about comparative advantage.

It think Razor gets it kinda right too, in identifying a lot of our consumption as "needless", but you have to take this with two grains of salt:

1.) define "need".. anything over a diet of rice/beans and a wood fire is not "necessary", yet producing goods and services beyond subsistence level is exactly what does drive and has driven the US economy (and most 'economies' in the usual way of thinking).

2.) the US market may get saturated or not, or be too debt-ridden to continue consuming apace. But you can't underestimate the hunger of the world market for US-branded or US-developed goods. I think that is still doing a brisk business and will for a long time. I'm not really into trading stocks, but if I buy US companies anytime soon I will concentrate on ones that have a global reach.


I have a pretty simplistic view of the world and have trouble following the fed machinations and what they are supposed to tinker with. I don't have anything like a PhD. (or an MS or a BA) in economics. This statement of Brewer's makes sense:

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earnings are what drives stock prices.

except I think it needs to be modified to "earnings are what attracts investment". Will stock PRICES always go up? No. But will there always be some amount of "earning" happening somewhere? Most likely. Unless you expect across-the-board worldwide negative earnings for some period of years.. like the Great Depression, which seems too alarmist to consider (but I could be wrong!).

This looks kind of interesting:
Corporate earnings and the equity premium

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From the first-order conditions of the representative agent, we obtain an explicit closed-form expression for the stock price. In turn, this allows us to derive a simple expression for the equity premium in which there are three distinct components. The first is the standard Mehra and Prescott (1985) equity premium proportional to the variance of consumption growth, which we call the consumption-risk premium. The second is proportional to the probability of a jump times the product of the jump sizes in consumption and the stock price. We designate this jump-related component the event-risk premium. The third is proportional to the covariance between the growth rates in consumption and the corporate fraction, and is designated the corporate-risk premium. This three-component model of the equity premium nests many of the previous models in the literature and provides a number of new insights about the determinants of the equity premium.

um, yeah.. what they said!

No, but seriously:

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while aggregate consumption declined nearly 10% during the early stages of the Great Depression, aggregate corporate earnings were completely obliterated, falling more than 103%.

Is this possible today?
http://en.wikipedia.org/wiki/Great_depression

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Keynesian economists called for governments during times of economic crisis to pick up the slack by increasing government spending and/or cutting taxes.

Hmm.. have we not done that already? Razor appears to think that, far from being a cure, that's part of what ails us.

I guess I am whistling in the dark because I think the int'l. market is more open, accessible, and diverse than it was in the 1930s. (OTOH we can't underestimate the oil aspect which has been underlying basically all the prosperity of the 20th century. Fuel for factories, travel, plastic Wal*Mart crap.)

Aside from buying a tiny house fueled by wood, storing 2 years of food and buying gold bullion, what industries/investments are most likely to withstand a global depression? Which ones recovered most quickly during the last one(s)?

[brewer12345]

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Originally Posted by ladelfina Aside from buying a tiny house fueled by wood, storing 2 years of food and buying gold bullion, what industries/investments are most likely to withstand a global depression? Which ones recovered most quickly during the last one(s)?

Its been so long since the Depression that it probably doesn't matter what it was last time. Realistically, if there is going to be a global depression , the best investment you could make would be 30 year fixed rate bonds from countries that will never default (US, UK, Japan, Swiss, etc.).

But I think t he likelihood of that happening is so small taht I am not going to be out there buying the long bond.