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

To: Graham Osborn who wrote (55924)	8/21/2015 7:50:26 PM
From: Graham Osborn	Respond to of 78651

And then there's the Motley Fool approach - remain perfectly calm, and buy TWTR. fool.com

To: Graham Osborn who wrote (55924)	8/21/2015 11:06:26 PM
From: Paul Senior	1 Recommendation Recommended By sjemmeri Read Replies (3) \| Respond to of 78651

A lot to reply to. First Graham never espoused short-selling for the defensive or enterprising investor, afaik. And he didn't use technical analysis. This thread, in some observance of that, discourages reporting of technicals as a buy indicator for specific stocks (ref to thread header). And so also, short sale candidates are discouraged from being discussed here. Graham recommended moving between 25% to 75% stocks and bonds. Selling stocks and buying bonds when the stock market was overheated; doing the opposite when the market was cheap. I don't know of of a quantitative formula he may or may not have employed to determine too cheap, cheap, expensive, too expensive. I don't know that Mike's mantra is or was that you or he should be fully invested at all times. Imo, at his start here he was a struggling (read cash-poor) newly-minted doctor trying to establish a record and get into the finance world. How could he do anything else but invest 100% of his money if he need to show max performance gains and quickly? And when the market went down, he quickly sold -- sometimes. Whether because he astutely foresaw worse, whether he used technical analysis, I don't really know. In my view, when you have a record to achieve and a record to protect, you cannot afford to stay in stocks that could fall further than the pain you currently experience. The drop's a double whammy: you're losing money and rep. And so you sell. I make these interpretive comments about the author's p/e chart: Generally and imo, people in the '50's viewed stocks as risky, and they wanted dividends to support their purchases. It was not common to have an alternative view that somethings called "growth" stocks, which didn't pay dividends, were or could be, worth more than dividend-paying stocks. Interest rates were low and p/e's were correspondingly low. The '60's ushered in the era of growth stocks. Interest rates were low but p/e's rose. In the 70's there was both a dissatisfaction with growth stocks (nifty fifty) and a high interest rate. I prefer to believe the high interest rate drove people from stocks to bonds. At this point (2010-2015), interest rates are low now and p/e's are up. It's my world view that p/e of 20 for a growth stock is, if not unreasonable, at least perhaps sustainable, given that in decade of the '60's interest rates were higher and so were p/e's. So I don't see p/e's necessarily declining as long as interest rates remain low. (All jmo: I could have the facts wrong; I could be wrong.) So I reiterate - IMO if one is not willing to use TA on the long side (or short), one should probably be mostly out of the market at these levels. Graham didn't use TA to my knowledge, hence a pure Grahamian should be near 100% cash (IMO investment grade bonds don't yield enough to justify the risk, with special situation exceptions). I see it differently: If one uses TA and it tells you get out, then get out. If one uses O'Neil and the drop is 8%, then you're out. If you are a value investor, you might cut back (And many have here. Witness the high cash positions several have reported), but you are not out.