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This is part of an exchange that occurred on the Realtraders.com email list
that I thought might be of interest to some on this list. It deals with some
"mantras" and old wives tails that you hear that many people assume is fact.
The original message was from James Taylor who seems to be a raging bear.
Read on.
John
----- Original Message -----
From: "Gitanshu Buch" <OnWingsOfEagles@xxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Thursday, August 17, 2000 2:01 PM
Subject: [RT] STK: PEP & Mantras
James said:
> >The mantra of buy and hold for the long run is really a farce, since most
> >stocks continue to bleed lower.
>
And Gitanshu replied ->
> Coming from the astute James... one has to take the friendly bait and
speak
> up for oneself.
>
> Mantras have never made me money. This game is about making money.
>
> It doesn't matter to me that "most" stocks bleed lower. I'm long the ones
> that aren't bleeding lower.
>
> The other mantras I've heard & have not made me money:
>
> "Never trade options. They're a surefire way to the poorhouse". When I
told
> my family & friends I would be trading options for a living.
> "90% of options expire worthless, so it is better to be a seller of
> premium". The good Doctor had some choice stats for this statement
recently.
> "Never buy a bubble." (Yahoo, when it broke out of a base at a split
> adjusted $7).
> "Its a great company, I'm buying the dip." (same person on Yahoo, when it
> first fell from $240 to $170).
> "Don't trade commodities. I'm yet to meet one person who got rich trading
> commodities". Don't look now, but I'm heavily involved with
energies...going
> on 3 years, now.
> "Buy the new moon sell the full moon". Or was it the other way around?
Clyde
> had some stats shared frequently here.
> "Presidential election years are always bullish for the stock market". Not
> this one.
> "Buy the rumor sell the news". Question is, which rumor?
> "Buy low sell high". Question is, how do you know where "low" is? Was $60
> low enough on Amazon? Was $40 low on The Gap? How low before I buy K-Mart?
> Or any of the random dot bombs, many of which are trading below their cash
> balances?
> "A falling advance decline line is a bad indicator for the stock market".
> What has the recently rising advance decline line done for the market?
> "PE ratios are too high (Dow 3600)."
> "PE ratios are too high (Dow 8000)".
> "PE ratios are too high (Dow 11000)"
> "As goes January, so goes the year." Huh?
> "Tech stocks are overvalued (Nasdaq 1100)".
> "Rising interest rates are bad for bank stocks" When I posted that I
bought
> Citibank in December 99 as a strategic position against a consolidation on
a
> long term chart @ $50. Citi is now up almost 50% in 8 months in spite of
> rising interest rates.
>
> As said, this game is about making money, not mantras. Mantras have a way
of
> increasing spiritual peace and reducing financial peace.
>
> >Fundamentally speaking, in a slowing economy, service stations like PEP
> >should see weakening business.
>
> In economics, which James is proficient at, soda would be referred to as
> having inelastic demand. Something like salt.
>
> Why buy water at $1 when you can buy a can of PEP for half the price and
get
> the recommended daily body intake for sugar + water in the process?
>
> >I wouldn't own this stock at 1/4 of the price.
>
> At a fourth of its current price, the stock would represent a $20 billion
> revenue business selling for $16 billion, annually throwing off $3 billion
> in free cash from its operations without the need for any further
investment
> in / growth of its business.
>
> In just over 5 years, the cash thrown off by doing business on autopilot
> would completely pay for buying the business itself, and for the next 100
> years the profit would be mine to keep.
>
> I'd be a happy buyer at 1/4th the current price. Last I checked, the cola
> market's been around for the past 100 years. No reason for it to cease to
> exist in the next 100, esp when world population still grows @ 2% and soda
> sales grow @ 6% worldwide (read: soda gains consumption share).
>
> That's just my view, though. Someone would be happy to just get the $16
> billion in cash and buy CDs. So be it. Makes a market.
>
> Gitanshu
>
>
>
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