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Strategies & Market Trends : Waiting for the big Kahuna
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To: paulmcg0 who wrote (14444)2/28/1998 8:24:00 PM
From: Bonnie Bear  Read Replies (2) of 94695
 
Paul: at this point, the stock market is a form of gambling. Once upon a time there was a thing called "book value", it was the price a company was worth if it had to be pulled apart and sold to pay creditors. And bondholders would be paid first, and stockholders last. So to pay stockholders for the added risk they were given a thing called a dividend. If the company was growing rapidly a person might pay a little bit above book value knowing that the company would be worth it in the future. The pension plans know that bonds and convertibles are the place to be, but the public wants no part of them.
At this point any charlatan with the smarts to open the company and market it does not need a product, a profit, or a book value to become a multimillionare, because rabid "investors" are bidding up stocks just because they are stocks. The difference between a private company and a publicly-traded one to be 20X due to bidding wars on stocks is ludicrous, and all past markets of this type have ended in tears.
The banks and brokerages have no interest in telling people they are better off paying down their 18% credit-card interest or their 8% mortgages because that is the revenue stream that feeds the mill.

My longs consist of stocks at or below book value, stocks/CEFs with high dividends, or brokerage stocks, if you're going to play at the casino you should own the place first. ;-)

Anybody who has lived through a bear market will obey the law of book value. Because that's where stocks will drop to in a bear.
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