Welcome to a rational DOW
Ike, this where I keep disagreeing with you the most. If one makes money by being long on the market, that's great. Rational or irrational doesn't matter. Having said that - can you explain these factors:
1) why caterpillar is forcasting weakness ahead?
2) why McDonald is unable to meet the profit forecasts and not confident that it will for the near future.
3) why Sears is forecasting weaker earnings due to bad-debt write-offs and such.
4) why Boeing, with huge order backlog, is not able to deliver even at the peak of the cycle? Can you confidently say Malaysian Airlines or Indonesian airlines will not cancell orders to Boeing due to the turmoil in their countries? If this the best Boeing can do in boom times, what happens to them during a bust?
5) why Coca-Cola faltered in delivering a sustained growth in earnings after an accounting method change forced them not to include one-time gains in earnings?
6) we have gone over IBM's falling book value (-2%), increasing liabilities (+5%) And the ability to service the debt TODAY is not a logical explanation for the 100% rise in stock price in the last one year.
7) why Eastman Kodak has fallen on its face for 4 quarters in a row and failed to deliver even in this booming economy?
8) why the chemical giant Union Carbide failed to deliver and forecast another gloomy quarter?
9) why International Papers profits are in decline over the last year, (mind you this was a boom year)
10) why Hewlett Paccard missed the estimates for 5 quarters in a row and the stock continues to trade much higher than it was a year ago?
All these were DOW stocks. And the list comprises 1/3rd of the DOW. The rest of them are not that sound either. MRK is facing stiff competition, PG has had aneamic growth, JNJ has signle digit growth.
You are saying this a rational DOW. No way. What I am saying is that this is a stock mania and if you happen to make money by going with the trend, good for you. But, saying that the it is "rational market" amounts to self-delusion. FYI, earlier this year I made money on buying some calls on Gateway even when I was saying it is a doomed company. In my mind I was clear, GTW will go higher because of some manic importance given to a stock split. I did not delude myself by saying GTW was a fundamentally sound company.
-Mohan |
