investing help

If a company has "earnings and sales that continue to grow" even as its P.E. falls from 20 to 10, that should set off warning bells right there. It could very well be that that company has adopted "creative bookkeeping" to make its results seem better than they actually are. Or that company's "earnings" could be "increasing" because it has had one or more massive lay-offs, or is outsourcing labor to cheaper markets, or is employing some other gimmick to hide underlying problems.

 

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One problem I see with stocks, is that there is a lot of "blue sky" in the prices. Like the past Real Estate bubble, when "potential" fails to produce, the prices can plummet. I am talking about the companies whose stock is several times their hard assets. I do not bet on fixed games or stocks.

 

Wow, so "anyone who believes GM and Citi were "blue chips" at any time over the past decade should stay out of the market." I guess that would include just about everyone outside of the Inner Circle.

"After ages as a blue chip, GM leaves Dow"

http://newsok.com/after-ages-as-a-blue-chip-gm-leaves-dow/article/3374440#ixzz1adQWYQJf

 

This is your fundamental problem here. You can't possibly know how I would evaluate a particular stock as I haven't talked about that on this forum. I don't care if you pat yourself on the back for being an expert stock picker because it's irrelevant. If you can't explain it beyond these sort of platitudes framed by insulting anyone else who thinks different, then it's simply irrelevant. Calling forumers here lazy, overwhelmed, biased implying they foolish and having preconceived ideas, yada, yada yada, is exactly that. (you just said all these things, and in just 1 post no less)

Assumptions, Anecdotes, and Insults. This is what people do who don't have a firm basis for their opinions..

 

To people not schooled in value investing, your opinion is probably widespread. That is why value investing works. The "warning bells" of the untrained is sometimes the bargain for the value investor. Most people want to own what is popular, high priced and in the news. Successful investors want a company with the characteristics of a successful investment. It is very easy to spot creative bookkeeping if you bother to study the subject. It's all there in the financial statements and footnotes.

 

You've posted a lot about how you view investing in the stock market. I take you at your word. This might be a problem for you, but it isn't for me. It isn't my goal or responsibility to change your mind. I just want to point out where yoiu are wrong so that others will not be deceived. What they do after that is their responsibility.

 

Still trying I see, Cloud. I gave up many pages ago. They want you to explain why stocks are a better pick, yet they can't explain why they think gold is. Any fool can see it's risen, but nobody here can explain why, and what the ramifications will be...kinda like the housing market I just saw mentioned, and look how peachy that turned out. I just look forward to the loud pop, when I'll swoop in and complete my gold type set on their losses. A simple fact keeps escaping their logic....commodities have always been a poor investment vehicle, no matter what kind of spin one puts on it to bolster their decision.
Guy

 

There may be some younger folks here, and I don't want them to be turned off to one of the greatest wealth building mechanisms available to the average person - common stocks. I've already explained to them that companies retain and reinvest earnings which enables them to grow over time with or without inflation -- and that the performance of the market averages don't include dividend income, but they either don't understand or don't want to understand. I guess after they read a few dozen articles about the collapse of the world economy and how PMs will become the only money, it damages the ability to see other opportunities.

I also wanted to collect a $20 gold type set and bought exactly one coin - an 1896-S liberty. Then the price got away from me and I decided to wait for the next gold bear market.

 

Plenty of people here have discussed why gold has gone up and will continue to do so. It is after all, a bullion forum. I recommend that you read through some of the topics, including this one and if you have a question after that, there are plenty of people here who will provide answers. If you are indeed seeking advice here, it probably helps to not refer to them as fools.

 

Study after study has shown that for the "common person" stocks have been a bad investment over the last 20 years. And yes I know it's easy to cherry pick dates to show good yields, but for the average investor, this has been irrelevant. The stock market has been turned into a gambling casino that serves the finance industry. If you are not a part of that, then good luck because this is all that you will have to go with. There is a reason that tens of thousands are marching against wall street.

 

http://observationsandnotes.blogspot.com/2009/03/average-annual-stock-market-return.html

Lets review the facts using your selected time period of 20 years. According to this site, the total return from the market has averaged 10.2% annually. That seems about right -- a quadruple in the price plus dividends. Getting this return required no special skill other than to buy an index fund and do nothing. And by your own statements, this was a less than optimal time to own stocks due to many of the abuses you cite. Most people would not refer to this as a "bad investment."

 

Very valid points concerning some dangers of the market sir. My advice, FWIW, to average investors, is to pick index funds and invest into the periodically and never change. This is about the only good thing about a 401k is the time essence, and how its easy to just let it go on autopilot. Stock Index funds is not ALL I recommend, I always recommend a balanced portfolio, but for the equity portion I like no load, low fee, indexes for most people.

Small investors tend to be ill informed, and followers in markets. They like to buy more what is going up, and sell what is going down, exactly the opposite of what they should do. If you are talking about an active investor who does not know much about stocks, then you are 1000% correct. Small investors picking individual stocks frequently take outsized beatings. This is also true of all assets classes, though, so I do not think its a shortcoming of stocks only. Small investors always seem to fall prey for whatever is "hot", so its a universal danger. The same is completely true with PM. I never saw another buyers in the early 90's in the coin stores where I was buying at $4 or so, but raise the price to $30 and they are beating down the doors it seems.

The most successful plan I have seen for small investors is again map out a diversified portfolio, continue to build that, and ignore the news. Money can be made timing markets, buying right, etc etc, but its hard and most small investors simply do not have the background for it.

BTW, the marchers on Wall Street are the same old neo communist scrubs, demanding $20 minimum wage whethere working or not, free college, free healthcare, just generally wanting a welfare state. I wouldn't consider their opinions to be indicative of the general population, especially since most of us have jobs and can't go camping for weeks in the middle of manhattan.

Chris

 

What you are characterizing as "blue sky" are growth stocks in which future frowth is priced into their market price today. You are very right that if growth prospects dim these stocks can fall hard, but if they brighten they can go up disproportionately. It is up to the investor to analyze the price and if he doesn't agree with the growth prospects not pay that price. No one is holding a gun to your head to pay the asking price.

Btw, analyzing stocks based upon their hard assets really is worthless. This value, if the company needs to be liquidated, is never materialized. Any company I would have to analysyze on the basis of their hard assets is not one I would wish to consider anyway, since that means you think liquidation is possible. As a multiple of sales or profits is the best base index, keeping in mind possible changes, in my view.

Chris

 

Wow, it sure is thick in here. Gold is a bad investment? Stock advice being given based on sentiment? Peaceful protestors being maced, beaten, and illegally detained are communists? Queue the Twilight Zone music, or Dr. Who. They're both catchy.

If you believe that the bank failures and soveriegn debt in Europe aren't going to impact things in the US, then by all means put your wealth into IOU's. I am forced to keep some of mine in IOU form since I am not comfortable taking a loan out against my 401K. Of that I am doing Tocqueville Gold since it has physical gold in its portfolio, as well as a small hedge with a bear position on emerging markets which is also long USD. If I could move this into physical I would do so. If you don't have it in your possession, you don't own it as far as I'm concerned.

Sure, JPM beat expectations recently, but this was only because by the rules of the game they are allowed to claim profits when outstanding debt decreases even though they are not the same. The SLV and GLD are not held accountable to the SEC or the CFTC, nor are they held accountable to have what they say they have. Why anybody would think investing in a circus such as this is a good idea is beyond me.

 

I don't think anybody here ever said gold is a bad investment. But several people pointed out that the idea that gold is now a safe investment is preposterous. It certainly is a lot riskier at $1650 than it was at $250. And it doesn't have the dividend or inherent growth through retained earnings that common stocks have. So this thread has been more of a defense of the stock market than an attack on gold.

If I'm reading you correctly, you have an extraordinarily high percentage of your investments in PMs. I'll say a prayer for you.

 

I wish you luck with that sir, but I am afraid long term of what the outcome can be. Diversification into many asset classes is the only type of financial security I ever recommend, and if you are limiting yourself to physically possessing the asset I fear that is a severe limitation.

As to the protestors, I see them being maced when they are illegally occupying sites, protesting at a CEO's home, and generally resisting arrest. I would like to see some evidence of a protestor legally protesting being maced. All of them I have seen, (and I have paid attention), were all breaking the law repeatedly.

Chris

 

Somebody said this "commodities have always been a poor investment vehicle, no matter what kind of spin one puts on it to bolster their decision." somewhere on this page

And yes, extraordinarily high is an accurate assessment. Reason being is because nothing else except for commodities will have any value when the house of cards comes crashing down. It may not happen soon, but it must happen at some point in order for a recovery to happen. An economy based on legalized fraud is not one that can go on.

Maybe gold is riskier at $1600 than $250, but all it really does is track the national debt. Does anybody honestly believe they won't be raising the debt ceiling again before the next election?

 

Curious, in what way? Under what time frame are you saying the price of gold tracks with the US national debt? Why would they track with JUST the US debt when gold is an international commodity? Are you saying gold is tracking with all sovereign debt?

 

What I see is young girls on public sidewalks being attacked by police because they aren't staying in their "free speech zone". Diversification is good, I won't argue that, but diversification of commodities, not pieces of paper saying you own something that may or may not exist, or that only has value because of the power behind it saying so. I am diverisified though. I have PM's, food stockpiles, a garden, water jugs, water purifiers, firearms, ammo, vehicles, first aid supplies, firewood, wool clothing, and so on and so forth. I couldn't even begin to name it all. Don't think for a minute I'll be willing to trade it in for a shell game.

 

I'm just repeating what I see.

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