Re: [RT] recent exerpt from John Mauldin...

["Ira" <mr.ira@xxxxxxxxxxxxx>]

I find it interesting that people will follow some method of valuation for a stock or group of stocks.  Stocks have absolutely no value at all unless they pay you a dividend.  If they don't pay a dividend then you are operating on the greater fool theory.  You buy hoping that someone else will pay a higher price for it based upon someone else's theory that cash flow, PE ratio, EPS, or some other means of valuation can establish a fair sales price or value. 

 

Once a trader or investor realizes that what they own has no value unless the company is bought out and you get cash or the company is liquidated and you get cash there is no actual value.  Getting someone else's stock in a buy out puts you in the same situation.  No value. 

 

A company earns $1 per share but some idiot analyst thought that it should earn $1.01 and the stock drops X% over a penny.  Or a company loses 50 cents instead of 60 cents and the stock jumps Y%.  Stupidity rains supreme. 

 

So all that a trader or investor is doing is trying to outguess what the rest of the world of investors or traders is thinking about and basing their buys or sells upon that information.  Technical analysis allows one to apply the follow the herd theory in buying or selling short for profit.  The greatest detriment to a profitable career in the various markets is one's ego.  The major loss occurs when the trader can't admit that he was wrong and rides his decision into poverty.

 

Just one man's opinion.

 

Ira
www.delta100.com

 

 

----- Original Message -----

From: Mark Simms

To: realtraders@xxxxxxxxxxxxxxx

Sent: Saturday, February 16, 2008 8:11 AM

Subject: [RT] recent exerpt from John Mauldin...

"In summary, EPS (S&P 500) is likely to be near $90 per share in 2016. P/E is likely to be in the range of 20-25 if inflation remains low and stable. Higher inflation or deflation would drive P/E ratios back to the average of 15 or toward historical secular bear cycle lows below 10. If P/Es remain above 20, total returns over the next decade will be 4% to 6%.

If P/Es decline, investors could still see the current level of the stock market in 2016."

Maybe it will be different this time. But that is a dangerous assumption, as we watch the twin bubbles of housing and the credit markets implode all over the developed world. The bubbles may be even worse in England.

I find it hard to get enthusiastic about overall stock market returns at today's valuations, and given the environment.

Data is from Ed Easterling of www.crestmontresearch.com

 

__._,_.___

Your email settings: Individual Email|Traditional
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch to Fully Featured
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe

__,_._,___