|The DOW is up 280 points today....||PaulCL|
Jul 24, 2002 10:41 AM
|...so is it the end of the bear market or a technical bounce from oversold or a 'dead cat' bounce??
As an investment advisor, I am curious as to the opinions of the investing public. We hear the 'experts' all day long - they've been wrong. So...what do you think about the markets????
|I suppose that I don't count as the investing public,||TJeanloz|
Jul 24, 2002 10:51 AM
|But I continue to be a bear. Dead cat bounce. There is more downside in the NASDAQ and possibly some more in the Dow. Not much, but there is more. There was no event to cause a floor, good economic news is already priced in, I don't think there's much upside regardless of news as a result.|
|I tend to agree||AllisonHayes|
Jul 25, 2002 3:59 AM
|The NASDAQ is still overvalued. Wednesday's bounce has a lot to do with option expiration on Friday combined with short covering. Is this a bear trap?
Mutual funds typically have a fiscal year end Sept 30th, which will generate more downward pressure. Then there is dreaded October, followed by end of year tax loss selling.
We may get a short "summer rally" but then it will be back down again. Will we get a double bottom sometime in Jan-Feb?
Regardless, we are in for a long consolidation period. Perhaps 7-10 years.
I am in no hurry to jump back in. I have been on the sidelines for two years now.
|re: The DOW is up 280 points today....||Sintesi|
Jul 24, 2002 11:13 AM
|I know zero, zip, nada about the markets but I do remember hearing a smart guy on TV this weekend and he said that historically these bear markets take weeks to finally settle out. Sounded sage to me.
I think people are waiting and seeing. I haven't heard any overtly great news that turns everything around. I also think there is a general expectation that more instances of corporate malfeasance will be disclosed. I mean we've been getting a major story almost every week. People have been basically lied to and cheated, and it's not a simple trick to get their trust back.
Where do you expect the Dow to back up to? Will it break 10,000 again in the next 5 years?
|re: The DOW is up 280 points today....||netso|
Jul 24, 2002 11:34 AM
|I have continued investing, however the drop yesterday scared me because two of my mutual funds, Lord Abbett Affilitated and small caps took a one-day drop of 0ver 6%.
Overall my portfolio has dropped over 27% this year - Ouch!
|dead cat bounce i'm afraid||ColnagoFE|
Jul 24, 2002 11:47 AM
|just waiting for some more bad news to drag it down again.|
|is it really that bad?||DougSloan|
Jul 24, 2002 2:34 PM
|Here's a 5 year chart:|
|Yeah, it is,||TJeanloz|
Jul 24, 2002 3:29 PM
|There is the arguement that on the 5 year horizon, we are at 0.00%; but it's actually worse than this. Why?
Purchasing power is lower now, by 10%, according to the Fed CPI. So if you invested $1,000 in the Dow in 1997, while you would still have $1,000, it would only buy $900 worth of goods, in constant 1997 dollars. So that's not good.
Furthermore, there's a cost of money. You could have had your $1,000 in a CD making 3% interest and come out in 2002 with $1156. So that's another $156 you didn't get in on (granted, you would still be barely ahead of inflation).
The question of saving is: "do I forgo spending now, so that I can spend more in the future?" but with a market like this, the question becomes: "do I forgo spending now so that I can spend less in the future?" Obviously, the second is not desirable.
|Yeah, it is,||DougSloan|
Jul 24, 2002 3:36 PM
|But, with the market, you are partially buying the opportunity to make 50%, 100% or whatever. That is worth something. Whereas with the CD, your best return is fixed and known. With stocks, it's like you are not only buying an investment, but a lottery ticket at the same time.
Yes, in hindsight it looks pretty bad at even money factoring in cost of money and inflation. That is, of course, unless you got out around early to mid 2000.
My view is that the only people who are hurt are the ones who *must* sell because they need the cash. Otherwise, let it ride.
Was it you who related the quote: "In every transaction, one of the parties is making a mistake"? For every seller, there is a buyer (by definition). Maybe now is a fantastic time to get in! That makes this market a good thing, doesn't it? :-)
|Bear markets do end sometime||PaulCL|
Jul 24, 2002 4:45 PM
|Historically, bear market ends are heralded by three "events"
*extreme volatility on the downside. One day, two day or several week volatility.
*extremely high volume. Today was 2.7 billion, that's with a "B"
*retail investors sell with reckless abandon. The capitulation. 'throwing in the towel' Retail short interest goes through the roof. Have they?? You answer that one.
Where will the market go...I don't know. Personally, I'm in for the long term.
Thanks for the comments. Paul
|Bear markets do end sometime||Jon Billheimer|
Jul 24, 2002 5:14 PM
|A question for you security analyst types. I'm curious. What are the current P/E ratios, respectively, for the Dow, the S&P 500, and the TSX? And better yet, what are the corresponding returns on invested capital for the basket of stocks which make up these indexes. The answer to those two questions should go a long way to answer some of this speculation. That is, if there's a shred of rationality left in the equity markets.|
|There isn't an easy answer...||TJeanloz|
Jul 25, 2002 6:02 AM
|We can't really give a P/E for an index, as some of the stocks in the basket have negative earnings, which would blow the number out of whack.
But a couple of weeks ago (when the market was substantially higher), I looked at the P/Es of the dow components, and it wasn't inspiring. With the exception of Phillip Morris, and a couple of others, P/E's were all quite high; Microsoft, which has been abused, still has a P/E over 30. I think it's a good company- but that's optimistic. Wal-Mart, another great company trading near its 52 week low, also has a P/E over 30. 3M, another good one, with a P/E near 30. IBM is coming into line, with a P/E of 22; but it's lost a HUGE amount of value from its highs.
So, I look through the Dow basket, and I really don't see anything that I say, "wow, that is a good deal." There are some with fair values, but nothing IMHO, worth buying.
There are good stocks out there, but there are a bunch of overvalued dogs too.
With respect to Paul, stockbrokers are always coming up with a reason why the market's about to turn, I suppose it's there business. But it gets ridiculous to hear their analysis: "the market is ready for a long bull run because we've always seen long bull runs when Alan Greenspan carries his briefcase in his left hand." You can torture the data to make it say what you want; but we can hear the screams.
|Hey, don't mock the "left hand" indicator||PaulCL|
Jul 25, 2002 6:42 AM
|It's been right exactly 50% of the time!!
As for P/E's...who cares about the DOW. Thirty stocks are not representative of the market. The S&P 500 is the standard. Current P/E of around 27 based upon past 12 months earnings. Forward P/E based upon consensus estimated earnings for the next 12 months is about 15. The feeling is that the economy is getting stronger, earnings are definitely getting better (65% of SP 500 stocks have reported EPS higher than consensus this quarter). Usually, the stock market is 6 months ahead of the economy. This time, thanks to Worldcom,Enron,etc, the stock market is ignoring the economy.
What's right, what's wrong? Who knows. This is a stock pickers market,not time to buy a 'basket' of stocks. I'm over 20 years from retirement, so I'm holding. Is the market going down another 5% - 10% - 20% or is it going up?? I have no clue. But what I do have is time and faith in the 'name' companies of the country. Paul
|I agree, who cares about the Dow,||TJeanloz|
Jul 25, 2002 6:51 AM
|I agree that the Dow is not the indicator to watch, never was. But people seem mystified by its power, so that's what we pay attention to. We were happy the Dow was up 400 yesterday, but why?
The trouble right now, in my view, is one of faith. We say that the P/E is such-and-such, but we realize that that is the best case scenario, and may well be falsely inflated.
Your comment that earnings are getting better implies that you have faith that the reported earnings are correct. I believe that there are still quite a few companies pulling quite a few accounting shenanigans. I have 0 faith in the 'name' companies of America, but coincedentally, quite a bit of faith in the companies that focus more on building their business than their name (Expeditors shipping comes to mind).
There are good stocks out there, look at JILL, for instance (not a recommendation from me, just an example). But there are a lot of overpriced components of major indicies too.
|I agree, who cares about the Dow,||Jon Billheimer|
Jul 25, 2002 7:01 AM
|In my unqualified opinion, if P/Es of major indexes are running in the 15 - 30 to 1 range, depending on how one wants to calculate/estimate them, and long bond yields are in the neighbourhood of 5% or so, I'd say the market has a way to go to get shaken out, either through further slides or by going sideways until earnings catch up. No market can run forever on spec. Somewhere along the line there has to be real return on money invested. Either that or the stock markets of the world are nothing more than giant casinos.|| |