**OT** ... Ramblings ...
<<The investment world might have entered a new paradigm. >>
Yes, there are still morons overpaying for things just as they did in the '80s, '70s, '60s, etc. [N.B., these morons are probably outperforming 99.44% (Ivory Soap Outperformance) of the professionals at this point in the cycle ... but, history has shown that someone is always left "without a chair"/"holding the bag."] This alone does not a "new paradigm" make. The market has spasmodic periods where companies and sectors are consistently (and ridiculously) overvalued. These periods end; they typically end in a less than stellar fashion for those involved. Even recent history suggests that poor businesses implode. Time will tell whether today's most overpriced companies will suffer the same fate as, say, a Boston Chicken/Market -- once the largest % gainer for an IPO in history.
In the end, we return to "normalcy," with nary a new paradigm in sight. Unfortunately, the normal market happens when the market is closed -- some new paradigm is always in gestation ...
<<The major change is the disappearance of the old individual investor.>>
I am not sure what this person looked like. More importantly, I am not sure how this person behaved. Yes, 401k money is different from more classic pension money. This has introduced an element of "choice" for the individual. Still, the majority of the volume on the exchanges is and has been institutional money -- run by "investment professionals."
I would agree that, at the margin, individual investors have been more influential (of late) in the pricing of individual issues.
<<Fundamental analysis, while still useful, has little to do with actual stock prices going forward. Even TA, has to take into account this new paradigm.>>
In reverse order, I do not understand, nor do I care to understand TA. To the first point, one can not dismiss fundamental analysis out of hand. Fundamental analysis is the only thing that separates investors from gamblers. One has to be concerned with the underlying businesses. Moreover, one must apply a reasonable valuation to these businesses. My definition of Fundamental Analysis is deeply value biased; not Relative Value, GARP, or Momentum Value.
Practioners of this lost art may not drive the market, or even be in vogue for years to come. Still, when (not if) the bubble bursts, fundamental, value analysis will surely save its followers from the Big Mistake. It will also hold that these people will have the cash that will allow them to sort through the rubble and benefit greatly from others' panic and indiscriminate selling.
--Duker
|
