Believe me, Terry, I've given serious thought lately to taking profits in CSCO and LU and putting the proceeds into the Dogs of the Dow, despite the fact I think they have a great future. At some point, though, their multiples will get so high that returns going forward have to be reduced, despite the great growth rate. I doubt I'll do anything until they disappoint, though: would I rather have my money in a stock trading at 50 times earnings and growing at 30%, or in one trading at 50 times declining earnings, like KO? For now, that's an easy decision, and as I've said all along, the economy is going to have to worsen noticeably to bring this baby down, IMHO. I agree the volatility has been unnerving, but it's been that way since Aug. '97.
I can't explain the bulls' comeback today, except that people must figure that if we haven't been hurt by a devaluation yet, this one won't do it either. I guess Aug. '97-Oct. '98 must have completed the cycle for the emerging markets' effect on U.S. financial markets.
Strangely, the Washington Post's outstanding financial columnist, James K. Glassman, is writing a book about the new era of stock valuations, that investors are merely pricing in the fact that over 20 years, bonds and stocks are equally risky. I was floored by that coming from a long-time value investor. Been meaning to send him an email.
Paul |
