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Strategies & Market Trends : Dave Gore's Trades That Make Sense -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (3963)	3/17/2002 4:25:57 AM
From: Dave Gore	Read Replies (1) \| Respond to of 16631

Mish/ALL - COMMENTARY: Perhaps my biggest belief is that "NOTHING IS CLEARCUT FOR VERY LONG". Most traders think too far in advance where variables and uncertainties become so out of control that predicting anything becomes almost meaningless. You said I was nuts if I thought semi's were undervalued. Well, if I HAD said that, I would agree. This is a stock pickers markets in the short term and a crap shoot for the general markets in the next 6-9 months. You say the market is a screaming short if it gets to 2200. Why? Who's to say that in order for the money machine and the economy to keep churning, the "powers-to-be won't attempt to convince everyone that the NAZ is headed back to 50% or 70% of where it was 2 years ago? Think they can't do it? LOL! You're naive if you think they can't. When the economy is at stake, there's a lot of very powerful people that can get the Wall Street Hype machine going again. You're worried about the consumer, but who's to say that baby boomers and 401K programs won't continue to pour more and more money back into the Markets if inflation stays very low? They almost have to because bonds and CD returns just don't cut it. That could more than offset a slight drop in consumer spending. Besides with low interest rates, maybe the consumer will decide to act on those incredible rebates that are likely to pop up more and more if sales drop? Maybe consumer spending and debt will keep expanding and then explode in 2004? Who knows, maybe the next year or two will be great. On the other hand, who's to say that we somehow won't come to our senses in the next few months and that PE's will slowly start coming down to 10-30, even if a company is growing at a pretty brisk pace? If that happens, then the Markets might get chopped in half. Could that happen? Sure, but it isn't very likely. That would mean R&D companies would all be penny stocks, including most biotechs, alternative energy stocks, many techs, etc. since most don't make any money and won't for years, if ever. It also means that since investors still react to analysts comments (for some reason) then most analysts would have to speak truthfully, which would mean that those who did would kiss off potential investment banking business. Sorry, just ain't gonna happen. Sure, we could easily get a 15-25% pullback, if we go into a real recession, but is that likely? Not really. So, given all the forces at work, can anyone be sure of anything? NO! Will people continue to act like they are sure and present compelling reasons (by only telling part of the story)? YEP. Like I said before, if 200,000 million investors couldn't figure out Yahoo was overvalued 3 years ago at $250 a share or PCLN at $100 and made a killing by shorting them, then how can anyone believe anyone now who says they can predict where stocks are going in the next few months? So what do we do? To me, the ONLY thing that makes sense is to go "long" a low PE stock or perhaps a sector, whenever it drops to levels that make it a good buy based on historical valuations and a best guess of growth based on as much information as one can gather. The same holds true for going short when a stock or sector gets so far ahead of itself that the odds of a sizable drop are just too compelling. That's why buying relatively stable low PE and medium growth stocks like KG or WM or COST when they dip pretty severely are far safer that a tech stock with a PE of 100 or more. Could you buy something like the QQQ's everytime they dip severely or significantly. If your timeline is 10 years, sure. Five years? Probably. One year? Sure, with some luck. Many in fact would be a lot better off doing that than daytrading. Daytrading for most is like playing at a casino day in and day out and finally losing whatever profits you had to the house and then some. Could you buy common stock and write covered calls or puts? Ahhhh....now there's something to really think about, especially if you think the minor ups and downs are bound to continue. It's all pretty confusing and the more I hear and read, the more I realize how little anyone really knows.