>>Who wins ? Who loses ? Why ?<<
tazio (cool name! :-), give me a time frame. winners become losers and loser become winners all the time. it does amaze me how many bull losers there are at current lofty stock levels. here's an anecdote. i know someone who was buying all the hot stocks at what i thought were ridiculous valuations. they kept going up and he kept making a ton of money.
he didn't understand my negativism b/c the stocks always went up. i should buy or i was missing out, or so i was told. this went on for 2 years. i stuck to my guns, as i do now, that stocks in gen'l are priced well above any reasonable economic model when using comparisons against a lowly t-bill. the t-bill outperforms so much it is truly silly.
anyway, when the naz dipped from 5k to 3.5k earlier this year, the person i knew lost nearly $400k and locked in the loss b/c he had to sell positions. a BIG, BIG winner either lost it all or turned into a net loser - i don't know which. i hope he didn't lose as much as he made.
i recently spoke to him and he told me of the magnitude of loss. in the very next sentence he said he bought intel at $48 and quipped "when is the next time you'll see intel this low?"
it has dropped nearly 20% since that time.
you see, what worked so well on the way up leaves perma bulls clueless on the way down. rational valuations of real economic businesses are rarely a consideration that matches the "just buy, everything goes up" "mentality."
all i know is this. NEVER in the history of the world have valuations like we see today (even after the 30% drop in the naz) lasted forever. NEVER in the history of the world have stock investments disconnected from base investments like a t-bill and stayed disconnected forever.
"this time is different" indicates some level of thought. maybe it is. it would be the FIRST time in history and i think the odds of irrationality staying w/ us forever is limited. most folks, however, don't even understand many of these concepts.
a former engineering coworker told me his investments in msft, csco, intc and orcl would aplit 4 more times and that would be his retirement. when i explained that those companies would be valued at 2 to 3 times the gdp of the entire united states, he didn't bat any eye. "why couldn't they split 4 more times, they've done it in the past..."
hats have been checked and crayons picked up in far to many cases (not all, of course), imho.
economics is a terrible predictor. it is a basis for judging actions as rational or irrational, though. the end of this bubble will not be pretty. |
