<The hypothetical using my business is ridiculus. If my business had dropped in half, I was losing money anf firing employess right and left I doubt I could sell my business for book value. I would have few buyers just like GLW.>
No it isn't ridiculous. What you said is exactly the point. People are valuing stocks without keeping a long term perspective. So profits are down. Big deal. Is that a good rationalization for a stock trading below cash or below the value of their hard assets? Sure, cash flow could continue negative for a little longer, but if a company has a strong enough balance sheet to weather the storm, and they are cutting costs and becoming leaner and meaner in the process, when their sales turn around, their profits will go up even more than during the last bull market. You said it. Few would bid for your business during bad times. That's because the majority of people vote with their emotions instead of with a clear head. If a stock is trading below cash, it MUST be worth only that much and will be worth less tomorrow. If a company with $2000 in sales has a market cap greater than GM it MUST be worth that much and will be worth even more tomorrow. Just because you can't sell your business for more than book value during some arbitrary short term period doesn't mean that it isn't really worth more.
<I think the problem is is that you can't stand the truth.>
I understand the truth and have articulated it time and time again. The market goes to excesses in both directions, and now is a time when it has gone down too far, especially when economic data indicates that things are not as bad as the market has already discounted. The truth is you are a trend follower, and fundamentals apparently don't come into play at all. That is obvious if you would short a stock that is trading below cash just because it is in a downtrend. That is no different than the "gurus" that bought ridiculously overpriced stocks throughout 1999 and into early 2000 until the bubble burst, and continued to buy on the way down until they ran out of money. If you don't have an eye on the ridiculously low valuations that prevail today, you could end up shorting on the way up, and continue to short as the market goes higher until you run out of money.
<Dan, my man, you have a closed mine my friend!>
No, I have the mind of a realist.
Have a nice day!
Dan |
