Abraves, First, I am not a value investor. I am a valuation investor. They are different things. A stock has to be a reasonable valuation on my CAPM model, and many that are end up being stocks no value buyer would buy.
You are confusing a manic bubble with a plan. True, the most speculative and overpriced crap runs up during a bubble. This includes stuff like the Internut stocks. Good companies get way overpriced, and this includes some of the techs, a few of which are very good cos., and nearly all the drugs. And bad cos. get way overpriced, which includes most of the bank and brokerage stocks. True, if you owned tulips with the right fungus during tulipmania, you beat the avg. money manager. And if you got out in time, you made money, as perhaps 1 in a 1000 did. The same is true of all greater fool bubbles. There were plenty of folks who got rich in the 1920s and sold before the crash. Joe Kennedy was one. But most investors got killed. The same will happen with this bubble. If you are one of the nimble ones who will be able to get out before the crash destroys your net worth, good for you. I am simply saying that that is a long odds bet and I would play it with long calls instead of long stock. See techstocks.com. That is the way I would suggest playing the top of a bubble at low risk.
The herd is making an impact as they are being herded toward the slaughter house. No question that the herd eats a lot of good grass along the way. Also, no question, most get shot in the head at the end of the trail.
You always hear a lot of stock talk AFTER the market goes up. When I was at the track three years ago, some guy told me to buy Micron Tech because it was making so much money. He didn't know what products they made and had never heard of a tech cycle. And Micron, of course, was one of my favorite put stocks. I just couldn't believe that this guy's long position, knowing zero, was larger than my put position, when I had the co. scam down cold. That takes a lot of faith on his part and lot of recklessness. He no longer has any money, though MU stock did come back temporarily after the crash. He bought high and sold low. Most of the herd will do the same. Hopefully you are in the herd but not of the herd. <g>
MB |
