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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: Investor2 who wrote (195)	4/19/1998 11:28:00 AM
From: Freedom Fighter	Respond to of 1722

Investor 2, >Over the last few years, I've heard many, many bears claiming that >the >market is overvalued and the bull market is over. During that time, >the value of stocks, as defined by market indices, have increased >several >fold. Obviously, those individuals were dead wrong. There seems to be a misunderstanding in this thread of what "Value Investing" actually is, even among people who should know better. (not necessarily you) Let me explain in simple terms using something other than stocks. If we are flipping coins, we have no idea what will come up next. This is essentially what is going on in the market place. A good value bet is for us to take 2 to 1 odds on a flip. Let's assume we call heads. If tails comes out much more often for three years straight, accepting 2 -1 odds was still a good value bet even though we are losing. The person giving us 2 -1 odds is still a fool even though he is currently ahead. What we can know is that over a lifetime, if we continue make good bets (VALUE) we will get the money in the end. If we continue to make bad bets we will eventually lose or underperform. If you have some experience in casinos, racetracks etc... you must have had winning days despite making poor value bets. The stock market is essentially the same thing except it moves in years instead of hands, races or flips. Now as to being wrong. There are market analysts and there are value guys. The market analysts who have been predicting an end to the bull market have been wrong. It is still unclear about the value guys since the "flipping" is still in progress. Warren Buffett began existing stocks last year. Does that make him wrong? In my mind no. He is a Value guy not a market timer. What he is saying is that you are accepting 3 to 5 on coin flips at present for many many stocks. IT is not possible to know the result of the next flip. Only the final result over the long term is knowable. (assuing you are correct about the values) That is why he is existing. As a shareholder of BRK myself I am very happy he is selling even though so far we are losing money because of it. >Perhaps I'm getting so used to the Bad News Bears' doom and gloom >that >it is simply becoming a drone in the background; a drone that my >consciousness eliminates as "white noise." Perhaps the Bad News >Bears' >message just isn't getting through to me any more. Perhaps I'm not >alone; i.e., the message isn't getting through to the great majority >of investors. Could be. What I will suggest is that you try to separate the Value Guys in the Graham tradition from other market analysts and those with vested interests in higher prices. Templeton, Buffett, Price, Tweedy Brown, Sequoia Fund and some others are Graham guys.