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To: Oeconomicus who wrote (130213)	8/17/2001 5:49:05 PM
From: craig crawford	Read Replies (1) \| Respond to of 164684

>> So, if single digit PEs are your definition of "value" and the only time in the last 40 years when single digit PEs were common was the latter half of the '70s, doesn't that conflict with your claim that it was a terrible time to be in stocks? << well the s&p bottomed twice in the 70's at an average pe of 7. it also bottomed in 1937 around 7. so it was a terrible time to be investing in stocks unless you bought exact bottoms. my whole point is, we are nowhere near a pe of 7 now, so we are nowhere near the bottoms seen in the 70's. that's why i believe it is generally not a good time to be buying stocks. >> OK, so you don't like my timing? How about a low-to-low average then? '74 bear market low to '82 bear market low << i don't like how you keep changing the rules when the data doesn't provide much support for your argument. >> Nasdaq sat at 54.87 on 10/3/74 and bottomed in '82 at 159.14 on 8/13. That's 14.5% p.a. Over the same period, the CPI went from 50.6 to 97.5 for an 8.7% annual change. Seems emerging growth (and the Nasdaq then was much more of an emerging growth index than now as mature companies were much more likely to move to the NYSE or AMEX) gained 5.8% p.a. after inflation from market low to market low. Not 1999 returns, but it sure doesn't suck. << yadda, yadda, yadda. once again if you tinker with enough data points you can try to make a feeble case. for one thing we started out talking about the dow, then you switched to the s&p, and now you use the nasdaq to support your argument. you started out using tops and now it's more convenient for you to switch to bottoms. even if i don't take the time to check your numbers and accept them at face value, you came up with a paltry 5.8% return. --for one thing a 5.8% return is a serious underperformance. taxes were quite high back then and you hardly would have made any money when all was said and done. --you eventually settled on using the nasdaq for your argument. the nasdaq of the seventies was very different than the nasdaq of today. the nasdaq wasn't even founded until the 70's, and it immediately plunged 55% after it's opening. it was made up of very small companies and was considered much riskier than the larger exchanges. so to achieve your paltry 5.8% returns you would have had to invest 100% of your money in small risky companies on a new exchange. most investors don't do this. they allocate their portfolio with some large cap, some small cap, some international, some bonds, etc. this would have diluted your returns somewhat. --furthermore, you want to shift the timeframe out to 1974 thru 1982. originally my comments were about the 70's, not the latter half of the seventies and on into the 80's. i don't believe today's market is anywhere near the 1974 lows, we are closer to the late 60's or maybe early seventies. --you switched your data points to using bottoms instead of tops. usually when a bottom is put in it doesn't last very long, it is sort of a capitulation and the market rallies very hard off the bottom. being even a few weeks or months early can make a huge difference in returns. right now you claim that the carnage in the nasdaq is enough, down about 60%. the dow peaked sep 3, 1929 at 381.20. if you were to buy into that down 60% that would be 152.5. it eventually slid to 41.2 on july 8, 1932, down another 73%!. when the dow finally bottomed in july 1932 it rallied hard up 372% by mar 10, 1937 to 194.4. a nearly five-fold return in less than 5 years is not too shabby. once again if you can buy exact bottoms you can almost always show some sort of decent return. but what if you jumped in too early when the dow was down 60% at 152.5? you made a whopping 27% over about 6 years. a big difference from 372% in less than five years! obviously if you are a good enough stock picker or market timer you can make money in the market at all times. if you don't mind putting a high concentration of your portfolio in riskier small caps i'm sure you can make some point that money was made in the 70's or the 30's. that doesn't change my basic point which is to say that there are times when the market underperforms or even generates negative returns for extended periods of time. i believe that will be the case for the next decade. if you think you are smart enough to find those small cap winners that will thrive despite a terrible economic environment be my guest. i'm suggesting an easier way. you could've invested in commodity related resources in the 70's and you would have done much better than trying to be some kind of miracle stock picker market timer. you can do the same for the next decade and you will generate much higher returns. so quit being such a lazy ass like everyone else here on si that is too lazy to learn a new type of investing. people that are trying to bottom fish stocks aren't going to get rich. they are all losing their ass. take this opportunity where there isn't much at all worth buying to get up to speed on the investments which are going to do well in the coming decade. all you lazy asses out there who keep trying to trade stocks like ebay, emc, cien, yhoo, amcc, jdsu, brcd, itwo, because that's what you're "comfortable" with, well you deserve to lose your money. you are finding out the hard way that the market is not a game and it takes real work and non-conventional thinking to make money. trying to hold on to the past gets you nowhere. have the courage to step outside the box and defy the conventional "wisdom" will be what really pays off.