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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E.J. Neitz Jr who wrote (15562)	10/3/2002 11:56:10 PM
From: James Clarke	Read Replies (3) \| Respond to of 79126

Great article - thanks. Very timely post in my view. I find myself by far more fully invested than I've been at any time in the last two years - and that was not true a month ago. Every stock I own is probably going lower tomorrow, but that is exactly what it will feel like on whatever day happens to be the bottom of this collapse. I used to make market calls on this thread, years ago, but thats silly and I was never right. I buy when I have good ideas, I get fully invested when I have a lot of really really compelling ideas. I've seen buy ideas like this twice since I got going in 1995. March of 2000 and September of 2001. Both were great times to be buying the kinds of stocks we buy, though at both times we were in agony over losses from what we already owned and there was no reason whatsoever other than valuation to buy then. I'm learning that its not about making market calls, its about knowing when you're seeing a whole lot of compelling buys at the same time and knowing when you're not finding anything.

To: E.J. Neitz Jr who wrote (15562)	10/4/2002 2:19:30 AM
From: Paul Senior	Read Replies (1) \| Respond to of 79126

Ed-in-Pa: Thanks for that post. Very helpful. With all the negativity out there and with stock market losses piling up, man, I'll take any positive reinforcement about stocks and investing that I can get. Paul Senior

To: E.J. Neitz Jr who wrote (15562)	10/4/2002 7:02:37 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 79126

i must take issue with the interviewee's logic and conclusions... The S&P 500 is 46 percent undervalued right now based on what people believe is the Fed's formula for valuing the stock market. the "Fed model" is a joke. it is sloppy data mining at best. it worked for 20 years so people called it a law. but it didn't work at all for many other 20-yr periods, and it hasn't worked for the past year either. this is another example of people being "fooled by randomness". P/Es (price-to-earnings ratios) are still historically high, but the market's average P/E can be higher when interest rates are low. this presupposes a permanent correlation between rates and PEs. there is no such correlation. this is just more data mining. it is really sad to see the warm and uncritical welcome such sloppy thinking gets in today's market. just indicates to me that sentiment is nowhere near bearish enough for a secular bull to begin again. these types of arguments about stocks being cheap because of low interest rates are utterly demolished by Smithers. i summarized some of these ideas and provide links to a couple of his papers here: Message 17888745 basically, low rates are not an argument for high PEs. PEs (or more specicifically the dividend yields which depend on them) are a real return; rates a nominal one. remember that in the last low-rate environment, from the 40s through the 50s, stock dividend yields were higher than bond yields (until 1958). the S&P 500 would need to fall to 410 for today's dividend yield to exceed the 10yr T yield. about a 50% drop. this was pointed out by Fleckenstein yesterday.