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40 yr S&P 500http://invest.kleinnet.com/bmw1/stats40/%5EGSPC.htmlGary
I also have one with earnings and dividends, although it's over a month old at this point.http://darren78.homeip.net/investments/bmw/sp500.pdf
If the market is too expensive it's best not to buy it. Most people can't even value a single company properly, how the heck do you do it for a whole market? Not only that, since a market is an average of all the things being offered in it, some things must be above average while others are below average. Why not spend the time looking for the bargains that are certain to exist? That seems a more profitable venture than worrying about the price of the market, unless you are into index funds, that is.I have read a lot of books about investing and, frankly, Security Analysis is one from which I have not been able to extract anything really useful to increase the yield of my portfolio. The concept of "intrinsic value" is a Utopia, not something that you can buy or sell in the market:This idea that owning stocks in good companies will pay off eventually has become an article of faith for modern investors, big and small. Loeb disagrees with it. In his view, it's foolish to risk money on something that might happen eventually, specially in bear markets when stock prices are depressed for 10-20 years. Ignore the general condition of the market and buy shares of good companies at the wrong time, and you can grow old and die waiting for the price to rise to reflect the "true value" that Loeb would say was a figment of Ben Graham's imagination (John Rothchild).From the foreword to The Battle for Investment Survival by Gerald M. Loeb, another of my Summer reading books.Warren Buffett studied under Ben Graham but people tend to forget that Buffett moved on beyond Graham to Philip Fisher, author of Common Stocks and Uncommon Profits. People look at Security Analysis as a bible and this clouds their imagination by holding it in veneration. Security Analysis is exactly what the title says it is, a method of analyzing securities. It is not the best guide to investing or speculating. For that I'll take Fisher, Lynch or the BMW Method over Security Analysis any day of the week.Denny (taking refuge in my bomb proof shelter) Schlesinger
"I posted some brief comments on what I view as a very expensive stock market valuation.....Is there a BMW Chart for the S&P 500 somewhere?" - kahunacfaI hesitate to argue with you about this. We have been in agreement for too long on other boards, especially the Philip Morris Board. See? I even refer to it as you prefer since neither of us ever accepted Altria as their new name. The link that was provided to Mike Klein's excellent chart of the S&P 500 tends to speak for itself. I often use it to explain why I believe the market is right on the money today. http://invest.kleinnet.com/bmw1/stats40/%5EGSPC.htmlKahunaCFA, you could be right. I would not be surprised if the market went down because it can be irrational, but I would certainly think that the forces are there to drive it higher. I like the earnings picture of the S&P and I love the trend toward lower Fed rates. They have not reduced their key rate yet, but I think that is the logical next move. That should bode well for stocks. I think we are moving back to an overall situation similar to the post WW-II era with 10 year Treasury Notes yielding 3-1/2 to 4-1/2%, mortgages near 6% and stocks growing at 8% to 10% per year. But, I am an eternal optimist. We have learned much in the last 50 years and I think we can do this without the old volatility. Being off of the Gold standard helps a lot with liquidity. The Fed can do much more with the money supply to smooth the bumps.Certainly there are things that worry me. But, on the whole, I think the future is very bright. The good news is we can see what is going to be happening by just keeping our eyes open. It is going to happen just like it is going to happen and we are just spectators. If we buy the right equities we can do well no matter what the market does.
We have learned much in the last 50 years and I think we can do this without the old volatility. But volatility can be our friend. One that I like to see every so often, but I don't want him visiting every week. I like to see him a couple of times per year.Dan
"But volatility can be our friend." - DanPozMy friend, volatility is the name of the game. Volatility is what makes the BMW Method work so well. I have no desire to see volatility go away. This post is about the market and what I am talking about here is market volatility. I want to see market volatility minimized because That is what spooks most investors. I love volatility in individual stocks and that should naturally keep going forever. There will always be some catastrophe to report that will give us value choices. What I hate is a national catastrope that creates collapses. These hurt large numbers of investors and suck liquidity out of the markets. These create recessions and sometimes depressions. I will gladly give up those creators of volatility.The smoother the S&P 500, NASDAQ and DOW market curves get, the more people will appreciate the "safety" of equity investing. Indezes will look good to the average guy.Meanwhile, the underlying stocks can be just as volatile as ever. In other words, the game will be isolated to the speculators while the investor can buy and hold long-term with a level of confidence. This can only exist with low interest rates, low inflation, high employment and a stable economy. Meanwhile, that stable economy will exist due to the first three. That is the job of the Federal Reserve and they seem to be doing a swell job the way I see all this. Mowever, I would like to see slightly lower rates. I think they over did the hikes two years ago and the Bond market is proving that to be so. There is no way that the overnight rate should be 5-1/4%....4 to 4-1/4%, maybe. Any cuts should help the stock market a little but I think the they are already priced in.I believe that the Wall Street movers and shakers love big stories that move the whole market to disguise their individual stock plays. This large scale volatility is really harmful to the small investor, but the big boys could care less. They would be happy if most of the small investors did not exist anyway. If you read Jeremy Siegle's book "Stocks for the Long Run," he has a chart that shows the decline in market volatility over time. This decline is hurting the ability of the big players to make the big bucks, but the decline in activity is created by an ever increasing influence of us small investors. I think this is a positive change and I hope to see it continue. I could care less if the big boys make money...I care that I can make money. That is the basus of the BMW Method and it works for us little folk. I think it is actually the game that the big guys are playing, but that is just my belief...I certainly have no real proof.Anyway, that is what I meant by saying, "We have learned much in the last 50 years and I think we can do without the old volatility."
Denny...The Intelligent Investor is far better than Security Analysis, and more germane to modern value investing. The concept of "intrinsic value" is a Utopia, not something that you can buy or sell in the market:I have to take issue with that, because we can just as well say that the concept of "Average CAGR" is also a Utopia and we could grow old and die waiting for the price to get back there.
Anyway, that is what I meant by saying, "We have learned much in the last 50 years and I think we can do without the old volatility."Thank you for the reply. Your explanation gave me another one of those "Aha" moments!DanWho sometimes can not believe that a board of this quality can be had for free.
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