I just happen to think this is being less than clever.
I must admit that I am much less than clever. I have nowhere near enough knowledge nor experience to understand where the market as a whole should be, by any metric. I do believe I can get a grasp (however tenuous) on a few individual companies' money making ability, and I know I can set a price range that I'm willing to pay for that cash generation. I also believe I can tell you when I start getting uncomfortable with the price of a stock, and I would sell. Both of those decisions have everything to do with the sales, profits and business model of the individual company, and nothing with macroeconomics.
I'd expect you'd retort that the macro will have a direct effect on the micro. True. In the short term. In the long term, it doesn't affect the business model, the necessity of the products sold, or any of the long term basics by which I choose the companies I consider for investment.
To be specific: I would not have trouble sleeping if I bought Nokia and Intel today. Both companies are very good at making lots of cash out of products that everyone wants. For the next six months or so, according to most, everyone will want a little less of what Intel and Nokia make. I am not clever enough to know what effect the market as a whole will have on these two cash generating machines. I do know that over the long haul, paying somewhere in the 20s seems reasonable (I'd rather pay less) for the amount of cash they will generate for me. If they ever stop (or even significantly reduce) making money, I will reconsider my stance and my ownership. But I won't be looking at the macro environment to make that decision. I just don't know what it means.
Please note, that doesn't mean I ignore the macro environment. I'm not trying to stick my head in the sand. I want to learn more about it. But it's like the difference between using Newtonian and relativistic (or even quantum) physics to launch a rocket. I'm easily capable of just using Newton for now, and making course corrections as I go. Yes it costs more, I don't make as much, but I will be less off course in the end. Also note that I'd have to make some corrections as I go anyway, because no model will be perfect. So I might as well stick to what I can handle.
Looks like this little discussion of ours is at least stimulating thought.
Which is the purpose.
Yes, thank you very much for this great discussion.
Tom CF |
