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Post by Deleted on Dec 19, 2013 9:28:11 GMT -5
if you have a LONG time line where the investments can just grow, i totally disagree take GE for an example....$ 27.xx a share today probably 10% frothy (my max buy price would be at $ 24.xx right now but unless something drastic happens (BP event), this company is worth $ 50 10 years from now and while you own it, they pay you around 2% a year in dividends just because..... Man I wish that was a true statement. I held GE when it was at $45 a share under Jack Welch. Then 2008 happened. Low teens and no dividends....... Ain't anywhere being frothy at $27
The past is the past. You can't make investment decisions based on what has already happened.
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Post by Deleted on Dec 19, 2013 12:55:38 GMT -5
Suggestions for 2014: finance.yahoo.com/blogs/talking-numbers/dr-marc-faber-three-bold-predictions-2014-113455980.htmlHis list for shorting is the same as mine except for VEEV, which I'd never heard of today. I was thinking of taking small positions in each one before the year ends. If people are growing tired of them, early 2014 would be a good time for them to start selling (i.e. postpone taxes until 2015). Amazon's valuation also is freaking nuts, although being an actual established company making real profits, I'm a little fearful.
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Post by djAdvocate on Dec 19, 2013 17:44:36 GMT -5
i like GE, sort at a gut level. never bought any.
i like NSRGY at the same gut level, and i buy more every time it drops.
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Post by Deleted on Dec 19, 2013 20:44:13 GMT -5
Man I wish that was a true statement. I held GE when it was at $45 a share under Jack Welch. Then 2008 happened. Low teens and no dividends....... Ain't anywhere being frothy at $27
The past is the past. You can't make investment decisions based on what has already happened. performance.morningstar.com/stock/performance-return.action?p=dividend_split_page&t=GE05/08/2000 3:1 05/12/1997 2:1 05/16/1994 2:1 05/26/1987 2:1 06/02/1983 2:1 06/08/1971 2:1 Spin-Off History GE
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Post by Value Buy on Dec 19, 2013 23:12:48 GMT -5
They had their day in the sun. What have they done since 2006? If Jeff Immelt disappeared tomorrow, he would not be missed
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Post by djAdvocate on Dec 19, 2013 23:34:52 GMT -5
holy crap! i am regretting selling PSMT @ $75
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Post by Deleted on Dec 20, 2013 8:30:24 GMT -5
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Post by Value Buy on Dec 20, 2013 8:40:09 GMT -5
I really cannot blame Immelt for GE financial. I believe that was more of Jack Welch's baby, and Jeff simply inherited the problem. Jeff is quite the flimflam man, imo
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Post by Deleted on Dec 20, 2013 8:43:57 GMT -5
VB
you dont like GE...we get it
hard to look at a company that hit the skids that badly as a sound investment
but for me....who never owned any at 60, or 70 a share.....
it is my #1 performer since 2008
historically they are just starting to get back what they lost....for me....it is entirely new ground
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Post by Deleted on Dec 20, 2013 8:51:03 GMT -5
My intentions to posting article is in this part.
"At one time, the GE Capital unit, which houses the company's financial operations, contributed nearly half of GE's total profit. But the unit's rising funding costs during the 2008 financial crisis nearly sank the entire company, prompting executives to try to scale it down.
After the spinoff, GE Capital will help finance medical equipment and other big-ticket items that the company produces."
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Post by phil5185 on Dec 20, 2013 19:21:07 GMT -5
Yeah, 1871 to 1982 = 8.23%/yr And 1982 to Oct 2013 = 11.65%/yr If you like data mining, look at 1982 to 2000, the SP500 return was 18.51%/yr for the 18 year time block, money was doubling every 4 years. The Rule of 72, money doubles when i x Y = 72. So a 100% return (a 'double') in 10 years takes 7.2%/yr for 10 years, a pretty weak return in a generic 11.65% market. (and 85% is only a 6.5% return). Given that the SP500 (now @ 1800) is going to be at 24,000 in 30 years, why screw around with short-term timing? In 2043 will you (or your heirs) care if you bought the SP500 at 1800, 1500, or 2500? politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html
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Post by djAdvocate on Dec 20, 2013 19:58:48 GMT -5
Yeah, 1871 to 1982 = 8.23%/yr And 1982 to Oct 2013 = 11.65%/yr If you like data mining, look at 1982 to 2000, the SP500 return was 18.51%/yr for the 18 year time block, money was doubling every 4 years. The Rule of 72, money doubles when i x Y = 72. So a 100% return (a 'double') in 10 years takes 7.2%/yr for 10 years, a pretty weak return in a generic 11.65% market. (and 85% is only a 6.5% return). Given that the SP500 (now @ 1800) is going to be at 24,000 in 30 years, why screw around with short-term timing? because i think the odds are better of the DOW being 10,000 in (3) years than 16,000 in (3) years.In 2043 will you (or your heirs) care if you bought the SP500 at 1800, 1500, or 2500? no. i will be all cash by 2033. politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.htmli have been doing market times for over 30 years. i have done quite well with it. made money 28 out of those years. and about 3x the rate that gd suggested was "good".
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Post by phil5185 on Dec 20, 2013 22:10:51 GMT -5
You're leaving a lot of money on the table w/ the 'loss avoidance' approach, the equity market has way more than 2 losing years per 30. The Law of Finance - risk and return are directly proportional - applies to everyone, even to you.
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Post by djAdvocate on Dec 21, 2013 1:40:17 GMT -5
You're leaving a lot of money on the table w/ the 'loss avoidance' approach, you don't know that. i only said two things on this thread. the first is that i would not put any new money into the market at these levels. i am not. that is not a statement of my current position. nor do i believe that i have stated it here or elsewhere. the second is that there is more than one way to hedge risk. amateurs should take the loss avoidance root, imo- particularly if they are close to retirement.
i would also add, however, that you have no idea how my investments are placed or hedged. but rather than making you guess, i have less than 20% of my assets in cash and cash equivalents right now. i am pretty highly invested.
the equity market has way more than 2 losing years per 30. The Law of Finance - risk and return are directly proportional - applies to everyone, even to you. of course. i have taken huge risks. and the result is that i have reaped way over average rewards.
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Post by Deleted on Dec 21, 2013 11:01:55 GMT -5
dang, dj. You are very pessimistic. 10k in 3 years?
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Post by djAdvocate on Dec 21, 2013 11:46:02 GMT -5
dang, dj. You are very pessimistic. 10k in 3 years? i think so. give me a minute, and i will go back through my notes. edit: my problem with this market is that it is so far above historical norms. if you look at the log chart in post 1, you will see that the trendline for the market HIGHS is well below the current level for the SP500. this is a 150 year old graph. that means that in the last 150 years, our current market highs have exceeded the predicted highs for over fifteen years, now. it is hard to imagine that we are going to simply cast off 150 years of market history, but even if we ARE to do that, an inflation adjusted number of 1280 would be the new bottom for the market (the old high trend). you may ask: why does it have to be that way? and the answer is: it doesn't. you can sit down at a roulette wheel, put your money on the 00, and win for the rest of your life, theoretically. but you and i both know that the odds favor "regression to the mean". if that were to happen in this case, the SP500 would bottom out at an inflation adjusted 500, not 1280. and, like you, i would call that ludicrous. but that is what the numbers say. therefore, saying that it will bottom out at 1280 seems superficially outrageous, but it really isn't, compared to where history says it "should be". we are way way way way way over normal returns for the last 30 years. i don't honestly know what that "means", but it makes me nervous.
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Post by Value Buy on Dec 21, 2013 13:38:06 GMT -5
dang, dj. You are very pessimistic. 10k in 3 years? i think so. give me a minute, and i will go back through my notes. edit: my problem with this market is that it is so far above historical norms. if you look at the log chart in post 1, you will see that the trendline for the market HIGHS is well below the current level for the SP500. this is a 150 year old graph. that means that in the last 150 years, our current market highs have exceeded the predicted highs for over fifteen years, now. it is hard to imagine that we are going to simply cast off 150 years of market history, but even if we ARE to do that, an inflation adjusted number of 1280 would be the new bottom for the market (the old high trend). you may ask: why does it have to be that way? and the answer is: it doesn't. you can sit down at a roulette wheel, put your money on the 00, and win for the rest of your life, theoretically. but you and i both know that the odds favor "regression to the mean". if that were to happen in this case, the SP500 would bottom out at an inflation adjusted 500, not 1280. and, like you, i would call that ludicrous. but that is what the numbers say. therefore, saying that it will bottom out at 1280 seems superficially outrageous, but it really isn't, compared to where history says it "should be". we are way way way way way over normal returns for the last 30 years. i don't honestly know what that "means", but it makes me nervous. "Far above historical norms"..........and yet many stocks are trading at very low price to earnings ratio in historical numbers. As far as 150 years of statistics, the first 100 years were run and owned by the business magnates themselves, and the "common man" did not own stocks or bonds, so you are comparing historical data that represents an apples and oranges approach. Last spring I expected the market to falter big time and pulled out of most investments, except for mutual funds, IRA, and MY 401-K. Big mistake. I missed about a 11% increase in the market before getting back in when I realized I was wrong.
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Post by Deleted on Dec 21, 2013 13:49:53 GMT -5
Is it possible that a few stocks are distorting the S&P 500? For example, both Netflix and Amazon are part of the S&P 500. They both have totally unsustainable prices (p/e ratios of 314 and 1457, respectively). I couldn't find a list of S&P 500 companies that includes p/e ratios, but it would only take a few companies like that to distort the whole index?
The Dow Jones seems to be a lot closer to its historical average p/e than the s&p 500 is.
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Post by djAdvocate on Dec 21, 2013 14:42:38 GMT -5
i think so. give me a minute, and i will go back through my notes. edit: my problem with this market is that it is so far above historical norms. if you look at the log chart in post 1, you will see that the trendline for the market HIGHS is well below the current level for the SP500. this is a 150 year old graph. that means that in the last 150 years, our current market highs have exceeded the predicted highs for over fifteen years, now. it is hard to imagine that we are going to simply cast off 150 years of market history, but even if we ARE to do that, an inflation adjusted number of 1280 would be the new bottom for the market (the old high trend). you may ask: why does it have to be that way? and the answer is: it doesn't. you can sit down at a roulette wheel, put your money on the 00, and win for the rest of your life, theoretically. but you and i both know that the odds favor "regression to the mean". if that were to happen in this case, the SP500 would bottom out at an inflation adjusted 500, not 1280. and, like you, i would call that ludicrous. but that is what the numbers say. therefore, saying that it will bottom out at 1280 seems superficially outrageous, but it really isn't, compared to where history says it "should be". we are way way way way way over normal returns for the last 30 years. i don't honestly know what that "means", but it makes me nervous. "Far above historical norms"..........and yet many stocks are trading at very low price to earnings ratio in historical numbers. i actually don't care that much about PE's, in the absence of all other data. they don't tell you very much. a company can have extraordinary gains, gains from tax loss carryforward, or be part of an industry that is dying, and that people are abandoning, but be the last player in it, and show terrific earnings and growth, but have no future whatsoever. low PE's are often a warning sign that things are going to go wrong, rather than a sign of intrinsic value that should be the basis of purchase. but furthermore, the historic norm for PE is about 17 for the SP500. the current PE is 20. that is not "low". that indicates that a PE of 14 should be expected in the short to intermediate term (regression to the mean).
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Post by djAdvocate on Dec 21, 2013 14:47:36 GMT -5
As far as 150 years of statistics, the first 100 years were run and owned by the business magnates themselves, and the "common man" did not own stocks or bonds, so you are comparing historical data that represents an apples and oranges approach.
forgive me for saying so, but the "common man" still does not own stocks, for the most part. at least not in a meaningful way. 90% of all equities are owned by people like me, and wealthier. but furthermore, the NYSE is an 18th century institution, and investing has been available to the masses since at least the panic of 1873.
Last spring I expected the market to falter big time and pulled out of most investments, except for mutual funds, IRA, and MY 401-K. Big mistake. I missed about a 11% increase in the market before getting back in when I realized I was wrong. sfw? it is totally irrelevant that you missed out on an 11% gain. you can only judge the probability of decline, and invest on that basis in a secular bear market. the alternative is to have negative real returns, on average. that won't work for me.
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Post by djAdvocate on Dec 21, 2013 14:52:22 GMT -5
Is it possible that a few stocks are distorting the S&P 500? For example, both Netflix and Amazon are part of the S&P 500. They both have totally unsustainable prices (p/e ratios of 314 and 1457, respectively). I couldn't find a list of S&P 500 companies that includes p/e ratios, but it would only take a few companies like that to distort the whole index? The Dow Jones seems to be a lot closer to its historical average p/e than the s&p 500 is. that is possible. the NASD has started to come out of whack, as well. the S&P is float based. so it is complicated. big caps do indeed distort the index. but it is a lot broader index than DJIA.
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Post by Value Buy on Dec 21, 2013 15:38:10 GMT -5
As far as 150 years of statistics, the first 100 years were run and owned by the business magnates themselves, and the "common man" did not own stocks or bonds, so you are comparing historical data that represents an apples and oranges approach.
forgive me for saying so, but the "common man" still does not own stocks, for the most part. at least not in a meaningful way. 90% of all equities are owned by people like me, and wealthier. but furthermore, the NYSE is an 18th century institution, and investing has been available to the masses since at least the panic of 1873.
Last spring I expected the market to falter big time and pulled out of most investments, except for mutual funds, IRA, and MY 401-K. Big mistake. I missed about a 11% increase in the market before getting back in when I realized I was wrong. sfw? it is totally irrelevant that you missed out on an 11% gain. you can only judge the probability of decline, and invest on that basis in a secular bear market. the alternative is to have negative real returns, on average. that won't work for me. I disagree with you common man thesis of today not owning stocks. If they are covered by a pension, IRA, 401-K they are participating in the stock markets. If they own a mutual fund they are participating in the markets. They do not own the individual stock personally, but the company working for their funds do. Even the so called lower class working part time are now participating in the markets through this process. And yes, it is irrelevant that I missed out on an 11 percent gain. Just like your premise may be totally irrelevant, if the markets continue upward.
This creates a tremendously large investment base compare to before 1950.
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Post by djAdvocate on Dec 21, 2013 15:55:58 GMT -5
sfw? it is totally irrelevant that you missed out on an 11% gain. you can only judge the probability of decline, and invest on that basis in a secular bear market. the alternative is to have negative real returns, on average. that won't work for me. I disagree with you common man thesis of today not owning stocks.
disagree away:
Table 6a: Concentration of stock ownership in the United States, 2001-2010 Percent of all stock owned: Wealth class 2001 2004 2007 2010 Top 1% 33.5% 36.7% 38.3% 35.0% Next 19% 55.8% 53.9% 52.8% 56.6% Bottom 80% 10.7% 9.4% 8.9% 8.4%
www2.ucsc.edu/whorulesamerica/power/wealth.html
If they are covered by a pension, IRA, 401-K they are participating in the stock markets.
ibid
If they own a mutual fund they are participating in the markets. They do not own the individual stock personally, but the company working for their funds do. Even the so called lower class working part time are now participating in the markets through this process. And yes, it is irrelevant that I missed out on an 11 percent gain. Just like your premise may be totally irrelevant, if the markets continue upward.
a predictable reply which misses the point entirely. let me try again: have you had any REAL gains in equities since the bull market ended in 2001?
This creates a tremendously large investment base compare to before 1950.
this is like saying that the fact that there are more cars available than 1950 means that you have more opportunities to drive. drivel.
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Post by Deleted on Dec 21, 2013 19:31:42 GMT -5
DJ, thank you for posting this chart. It's fascinating food for thought, and I do love poking around and learning. I'm kind of perplexed though. The debate on here made me really curious (thank you!) so I went internet splunking. I'm not sure about the S&P 500 chart in the link? According to Standard and Poor's Website which chronicles their history, they developed their first stock market index in 1923, which covered 233 companies, and the S&P 500 stock index was introduced in 1957. www.standardandpoors.com/about-sp/timeline/Looking further too, I'm fascinated to find out that the S&P 500 company selection process is somewhat dynamic. It looks like companies must meet certain criteria, but they are chosen by a committee, and can be swapped out. It looks like they also changed how they weight companies in 2005. www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3Dmethodology-sp-us-indices.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1244125623286&blobheadervalue3=UTF-8www.prnewswire.com/news-releases/standard--poors-announces-changes-to-us-investable-weight-factors-and-final-float-transition-schedule-54200952.htmlI don't know. I couldn't find much about the site multpl.com, but I'm sort of rubbing my face about the chart going back to 1871, when as far as I can tell they were publishing manuals with only Railroad data, along with later doing banking and insurance. This isn't very productive for forcasting or anything, but it just it just left me wondering as I was looking for other answers. I'll probably be poking this later, I was just wondering what might be going on, whether the site was back casting with current companies or something?
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Post by djAdvocate on Dec 21, 2013 19:51:31 GMT -5
DJ, thank you for posting this chart. It's fascinating food for thought, and I do love poking around and learning. I'm kind of perplexed though. The debate on here made me really curious (thank you!) so I went internet splunking. I'm not sure about the S&P 500 chart in the link? According to Standard and Poor's Website which chronicles their history, they developed their first stock market index in 1923, which covered 233 companies, and the S&P 500 stock index was introduced in 1957. i believe that the index charts the 500 largest companies prior to 1957.
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Post by Deleted on Dec 21, 2013 20:53:23 GMT -5
i believe that the index charts the 500 largest companies prior to 1957. I gotcha, thanks for clearing that up I'm not a market timer, so my general plan is the same either way but my curiosity got activated. I do wonder a bit about comparing apples to apples if that is the case, although I guess things might've been in adjusting flux anyway once the committees started meeting. According the current rules, to add a new company, it doesn't have to be 50% or more USA fixed assets or income, just a USA plurality of one or the other, and even that is negotiable. I dunno. I was reading Greg Ip recently, and I'm getting the impression that we keep wading into murky waters. The whole QE thing is a pretty recent concept from what I understand. Although of course, there's always the mantra that "this time is different," for the high times and the low times Lol, which is to say, I'll be thinking about this some more. I don't time, but it is neat to watch for signs. You could very well be spot on with this. I'm not seeing the indicators I watch for yet based on experiences from the Dot Com and '08 Crashes (extensive leverage, people doing nutting stuff like using credit cards to bet on "sure thing" investments, very low wage people asking how to invest $100 increments, people on unemployment being urged to get in now while there's a chance, stuff like that) but I definitely don't have a crystal ball. I'm just clinging tight for the ride hoping it'll work out since as you posted, wealthy people have a lot of money in there. I figure what they want generally happens
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Post by phil5185 on Dec 21, 2013 21:13:26 GMT -5
Take a look at this site.
politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html
Click on "historic performance". They describe how the SP500 index was started in 1926 and explain how they back-calculated the index from 1926 to 1871.
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Post by Deleted on Dec 21, 2013 22:04:33 GMT -5
Thanks Phil! Hum. Both the original chart and Political Calculations list Shiller's data. According to Shiller: www.econ.yale.edu/~shiller/data.htmSo I guess they used the 233 company S&P index, and then further back they used an amalgam of another company's indices listed in a 1939 book? I found the book, but the company selection explanations weren't also scanned, just the index numbers. cowles.econ.yale.edu/P/cm/m03-2/I guess further complicating: *ponders* I don't have a degree in economics, and I pretty much respect big guns to have a better idea of things than I do. This does seem like a lot of different methodologies to hammer into one extended whole though. Not sure what to make of it at this point. I am curious to read the book he uses this data with. If the roads thaw tomorrow maybe we'll hit the library.
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Post by djAdvocate on Dec 22, 2013 1:37:58 GMT -5
Thanks Phil! Hum. Both the original chart and Political Calculations list Shiller's data. According to Shiller: www.econ.yale.edu/~shiller/data.htmSo I guess they used the 233 company S&P index, and then further back they used an amalgam of another company's indices listed in a 1939 book? I found the book, but the company selection explanations weren't also scanned, just the index numbers. cowles.econ.yale.edu/P/cm/m03-2/I guess further complicating: *ponders* I don't have a degree in economics, and I pretty much respect big guns to have a better idea of things than I do. This does seem like a lot of different methodologies to hammer into one extended whole though. Not sure what to make of it at this point. I am curious to read the book he uses this data with. If the roads thaw tomorrow maybe we'll hit the library. i think it is amazing that they have ANY data for the older time periods. somebody is really nuts about data.
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Post by Opti on Dec 22, 2013 6:23:44 GMT -5
I wish I could figure out how to post charts. When I found historical S&P 500 data it showed what I remembered, huge sawtooth patterns, 2 and 1/2 between roughly 1980 and today. To my eye it looks like we are on the upper sawtooth trend and will have the swing downward soon.
I'm not sure where Phil gets his 11.65% numbers from 1982 to the present, but that can only work if you are buying on dollar cost averaging since the top of the sawtooth broached the middle 1500s twice in that period than tanked downward to roughly 800 and possibly lower. (Going off memory.) For peole like me who find employers tend to hire them and lay them off every two to three years, dollar cost averaging doesn't work well. Plus its complicated by waiting to qualify for 401K plans, being forced into buying company stock for the match that loses value, etc.
If you buy only sporadically, the S&P 500 can be a very bad bet. I remember in 2000, my coworkers expected to see the S&P in the 1700s in the near future. Apparently we finally sawtoothed our way there for the first time this year.
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