Current Share Price of the Company = 5 x Book value Per Share of the Company.
Current Market Capitalization of the Company = 10 x Quarterly Revenue/Sales of the Company.
Anything beyond is either irrational or manipulation.
I’m Still Going Long and Hoping the Markets Go Down
51–60 of 69 posts
Re: I’m Still Going Long and Hoping the Markets Go Down
#52Earlier quoted context omitted.
WWII ended the depression if you define "the depression" by its characteristic unemployment levels. In terms of quality-of-life, WWII was much... much ...worse than the depression. Rationing, regimentation, agit-prop, scam war bonds, not to mention having to march off to war...all worse than the depression by far. The notion that WWII fixed the depression is the "broken window" theory writ on a grand scale. http://en…
Well, I'd say that whether or not life during WWII might was worse than during the depression is a very complex question, and you'd get very different answers from different people at the time. It was clearly a lot better for some, a lot worse for some, etc. Even if it was worse overall, it gave us an economy and nation afterward that was far better than before the Great Depression. It is, of course, impossible to sa…
The fallacy is that you don't know, can't know, what our economy would have been after that period, absent WWII. What if we were on the cusp of recovery anyway and we had spent 5 years building railroad and machinery rather than tanks and bombs? The end result would have been a more efficient application of industry over time, resulting in a more abundant society, right?
But I can't say that was the case, would have been the case, any more than you can say the opposite, because we don't know what would have happened if we had tweaked x or y, and can't test it. That's why economics is a social science, not a science. That's why economists are still arguing over what caused the great depression, as well as what ended it.
Re: I’m Still Going Long and Hoping the Markets Go Down
#53Earlier quoted context omitted.
Well, I'd say that whether or not life during WWII might was worse than during the depression is a very complex question, and you'd get very different answers from different people at the time. It was clearly a lot better for some, a lot worse for some, etc. Even if it was worse overall, it gave us an economy and nation afterward that was far better than before the Great Depression. It is, of course, impossible to sa…
The fallacy is that you don't know, can't know, what our economy would have been after that period, absent WWII. What if we were on the cusp of recovery anyway and we had spent 5 years building railroad and machinery rather than tanks and bombs? The end result would have been a more efficient application of industry over time, resulting in a more abundant society, right? But I can't say that was the case, would have…
It's not a fallacy because I specifically pointed that out. You can, however, point to all of the various technologies and cultural shifts that impacted our economy, and the 50+ year period of unrivaled prosperity that occurred afterward and say it most likely was for the best.
Very few nations ever achieve a period like America did from that point to probably about 9/11/01. If we had to make the decision again from a purely economic standpoint, given the benefit of hindsight, we'd make it the same way.
Re: I’m Still Going Long and Hoping the Markets Go Down
#54http://economix.blogs.nytimes.com/2008/10/10/how-long-before... > Some may also wonder how long it will take the market to “recover.” It depends exactly what is meant by “recover,” of course, but one measure might be when the market returns to its pre-crash peak. The historical data is somewhat more distressing in this context. > After the Great Depression, it took 29 years — until 1958 — for the market to reach its…
You say that after the 1970s recession it took until 1992 for the market to make a full recovery to its inflation-adjusted peak. However, the average quality of life in 1987 was far ahead of that in 1971!
Stock index levels are not indicative of quality of life, job levels, or even the financial health of a nation. Just because the Dow has fallen 40% does not mean that as a nation we are 40% worse off, unless we happened to have all of our money in the stock market.
Re: I’m Still Going Long and Hoping the Markets Go Down
#55Earlier quoted context omitted.
I worked for a financial software startup from 05-07, and in my spare time there, wrote one of those programs that scans the whole market for stocks with low P/Es and consistent earnings. I found that nearly everything was fairly valued. When a stock had a low P/E, it was nearly always for a reason, like it being a homebuilder or financial or having a shaky economic position. No way was I going to invest in those. Wh…
An almost risk-free way to money in the stock market is to put most of your money in fixed income while apportioning a small % in long dated options. Eg. you think Morgan Stanley is dirt cheap at current levels ($10) and you are willing to invest $100,000 in them. Action 1: You bought $100,000 worth of MS shares at $10 each Action 2: You bought $90,000 in bonds that yields 11%. You bought $10,000 worth of Jan 2010 MS…
Assuming both scenarios are equally likely:
Option 1 Average ROI = 50%
Option 1 Average ROI = 12.5%
Re: I’m Still Going Long and Hoping the Markets Go Down
#56Earlier quoted context omitted.
I worked for a financial software startup from 05-07, and in my spare time there, wrote one of those programs that scans the whole market for stocks with low P/Es and consistent earnings. I found that nearly everything was fairly valued. When a stock had a low P/E, it was nearly always for a reason, like it being a homebuilder or financial or having a shaky economic position. No way was I going to invest in those. Wh…
An almost risk-free way to money in the stock market is to put most of your money in fixed income while apportioning a small % in long dated options. Eg. you think Morgan Stanley is dirt cheap at current levels ($10) and you are willing to invest $100,000 in them. Action 1: You bought $100,000 worth of MS shares at $10 each Action 2: You bought $90,000 in bonds that yields 11%. You bought $10,000 worth of Jan 2010 MS…
Scenario 3: The bond issuer defaults because of the sub-prime crisis, and MS is nationalised.
Woopsie daisies.
Re: I’m Still Going Long and Hoping the Markets Go Down
#57You are all missing the key point of Mark's whole reasoning. DON'T BUY STOCKS BECAUSE SOMEONE ELSE WILL BUY THEM. BUY STOCKS YOU WANT TO OWN, forever if need be. Why? Because they pay dividends! Mark doesn't care if the Dow goes to zero or infinity, he's got an acceptable yield on his stocks and that's all that matters.
Re: I’m Still Going Long and Hoping the Markets Go Down
#58Earlier quoted context omitted.
I worked for a financial software startup from 05-07, and in my spare time there, wrote one of those programs that scans the whole market for stocks with low P/Es and consistent earnings. I found that nearly everything was fairly valued. When a stock had a low P/E, it was nearly always for a reason, like it being a homebuilder or financial or having a shaky economic position. No way was I going to invest in those. Wh…
"I found that nearly everything was fairly valued" Does this still hold in light of the stock market crash this last week?
I haven't run the numbers. I don't work at the financial software startup anymore, so I don't have (easy) access to the data. However, a few spot checks of stocks that were too expensive in 2006 indicated that some were getting very reasonably priced.
Re: I’m Still Going Long and Hoping the Markets Go Down
#59I hate being such a sook about the markets. I want to sell now and buy when it's lower, but I'm worried we're at bottom. That said, I thought we'd hit bottom yesterday. And the day before that. And the day before that.
If you didn't have a risk management plan in place, for shame. Anyways, here's some stuff that will take the fear out of you. http://bigpicture.typepad.com/comments/2008/10/10-bullish-si...
The problem is that the credit fueled series of booms and busts that started in the 1980s might end here. At the end of the day growth of credit and money supply must be backed by productivity growth. I don't have the numbers right now, but be assured that credit and money supply growth hugely outpaced productivity growth since the 80s.
So basically that means we've been financing bubbles. In my view, it's up for debate whether a succession of booms and busts is necessarily worse than a more steady development. But since this latest bust turns out to be rather violent there will be a political reaction. If that reaction is to end the boom and bust economy then stock markets might not rise much for the next 10 or 20 years.
I'm not saying they won't snap back some from the current very low levels, but after that I wouldn't bet on the next huge upswing.
Re: I’m Still Going Long and Hoping the Markets Go Down
#60Earlier quoted context omitted.
An almost risk-free way to money in the stock market is to put most of your money in fixed income while apportioning a small % in long dated options. Eg. you think Morgan Stanley is dirt cheap at current levels ($10) and you are willing to invest $100,000 in them. Action 1: You bought $100,000 worth of MS shares at $10 each Action 2: You bought $90,000 in bonds that yields 11%. You bought $10,000 worth of Jan 2010 MS…
Assuming both scenarios are equally likely: Option 1 Average ROI = 50% Option 1 Average ROI = 12.5% High risk premium. A good time to take risks?.. if you can afford it.
Not for MS.
The probability of MS getting nationalized or going bankrupt is 90%. So it's 0.9 * 0 + 0.1 * 3 = 0.3 = -70%.
Whoops.