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

To: Michael Burry who wrote (4742)	8/21/1998 3:02:00 PM
From: Wallace Rivers	Respond to of 78614

My point exactly...the avg. (not Dow) stock has not been faring well. My opinion is that we are near a downturn in the economy (the bond market is telegraphing this, even as there is a "flight to quality"), and the Fed will be forced to lower Fed Funds at a minimum 25 basis. The Fed has, to a large degree, been appeased by the bursting of the bubble of asset inflation (read no more "irrational exuberance"), thus easing by the Fed. I personally do not see Dow 4500 with interest rates at historic lows...unless the Fed allows the economy to free fall.

To: Michael Burry who wrote (4742)	8/21/1998 4:11:00 PM
From: peter michaelson	Read Replies (2) \| Respond to of 78614

Well, to clarify my thoughts..... I meant to say if multiples on the Dow go to 12x and earnings there decline by 20%, what does one's portfolio look like. I use the Dow, not as a proxy for the market, but as a proxy for the largest, most noticed and generally high quality companies as compared to the thousands of small public companies. Before the LBO's hit the market in the 1980's, there were many, many small (i.e. not huge) companies at PE's of 7x and under - and they had been there for quite a while. Some had good growth,non-cyclical good balance sheets, good management, et cetera. My point is if the market is in the doldrums, valuations can become quite reasonable such that one would want to buy lots of stocks and the whole companies, too. But it might take quite some time for the market to recognize one's acute intelligence. In this thinking, dividends are indeed an attractive characteristic. My broader point is - patience is a virtue. One might be well-advised to let the pendulum swing on back for a while before going whole-heartedly long. There are some major changes taking place in the world economy and there's a good chance that all the resultant uncertainties will confound the markets for some time to come. For Mike specifically, though, if one has significant outside income which will almost surely continue for decades, then I should think it's fine to put everything you've got today into the markets. Best to all. Be careful out there! Peter