bluedevil Posted August 4, 2011 Share Posted August 4, 2011 By Jeremy Grantham's calculations, the S&P 500 is still 30% overvalued. If we simply get a drop to fair value, then far more compelling bargains will be available. I for one am really hoping for a correction. Like, others here, I am heavily invested in Fairfax, and until there is a correction Fairfax won't have an opportunity to unhedge and aggressively go after capital gains. Also, like others on this board, I have bought long-term puts on salesforce.com. I think we'll need a market shakeout to see that stock go down to where it belongs. Link to comment Share on other sites More sharing options...
ubuy2wron Posted August 4, 2011 Share Posted August 4, 2011 Today we started to see even the winners getting sold AAPL was down gold was red only the US dollar and treasuries were up. I bought some ABX today I still have 1/3 of my hedges on got close to going naked. LOL Link to comment Share on other sites More sharing options...
Smazz Posted August 4, 2011 Share Posted August 4, 2011 Well, I've been fully invested. Missed this opportunity. cant always time perfectly... Its not that I was trying to time the market its just that i didnt see fundamental reasoning to be all in - yes, you cant fight the fed and all that but at the end of the day i have to look at myself and ask did i do what i thought was best or am i just going to try to ride the wave? And i dont necessarily mean on a macro level. Greed has a short memory though - seenms like not a conversation goes by where someone doesnt tell me how easy it will be for them to make $ get in and out and all that - just have to watch it all the time right? oh, ive had to walk away from alot of people haha.. Link to comment Share on other sites More sharing options...
finetrader Posted August 4, 2011 Share Posted August 4, 2011 35% cash (it was 25%) but this % is growing because other assets price are losing value and i haven't put cash to work yet. Will buy BAC, WFC, BRK incrementally until i have no cash and S&P500 hit 1000. If it ever goes there. Link to comment Share on other sites More sharing options...
Parsad Posted August 4, 2011 Author Share Posted August 4, 2011 I for one am really hoping for a correction. Like, others here, I am heavily invested in Fairfax, and until there is a correction Fairfax won't have an opportunity to unhedge and aggressively go after capital gains. Also, like others on this board, I have bought long-term puts on salesforce.com. I think we'll need a market shakeout to see that stock go down to where it belongs. There is as much risk in Fairfax's strategy as those buying on significant downturns. For example, Fairfax missed much of the rebound through 2009 and 2010, as they invested very little in equities. Fairfax's strategy is far more essential to their success as a leveraged insurance company than the effect it would have for the average investor...thus the comparison is not a practical one by any means for the average unleveraged individual investor. Corporations, including financial institutions, are in remarkable shape, because they passed their risk on to government. Balance sheets are impeccable, earnings are terrific considering the weak global economy, and cash hoardes await deployment. When the S&P500 fell below 700 in 2009, there was a very signficant probability that many businesses, especially financial institutions, could go under. The circumstances are night and day now. Earnings have grown for many of these businesses in the ensuing three years, while their valuations are on par or less than they were during 2008/2009. This may be the early part of the correction, or it may be all there is...who knows? As long as you aren't leveraged and you are buying below intrinsic value, you will do fine long-term. Cheers! Link to comment Share on other sites More sharing options...
tombgrt Posted August 4, 2011 Share Posted August 4, 2011 I dont know if its worthy but a while back i wrote when the knife drops there is alot of fat to go through (IMO obviously) ie there will be alot of room for panick because there is such a room of questionable gains that the herd may want to get out while they can still profit. Who knows where the panic will lead. On the other hand, when you add in the devaluation of the dollar the S&P500 is actually down to the level of august 2010. :-X That is how I look at it as a foreign investor. Am I wrong in doing so? Because that doesn't change much for US investors of course. My country's indice (BEL20) already went from 2750 points to 2223 points and tomorrow we probably open at 2125-2150. Euro stoxx 50 is at 2412 points coming from 3000 points! Those are 20%+ losses! I am down 5% for the year and feel blessed when I see those charts. (Just trying to put things in perspectie, especially for myself. If it doesn't make any sense -> ignore me! ;) Link to comment Share on other sites More sharing options...
beerbaron Posted August 4, 2011 Share Posted August 4, 2011 This was indeed a great day. You know you are a Value Investor when your portfolio goes down 4% and you get all excited to buy cheaper then before. Question : Will FFH hedges support the stock for long... or soon some people will start selling their wins (FFH) to buy cheap stuff? 5% Cash now, but will get a nice 30% cash influx within the next 2 weeks we will see where we are when I get there. BeerBaron Link to comment Share on other sites More sharing options...
prunes Posted August 4, 2011 Share Posted August 4, 2011 Today was exciting. I held off in hope of lower lows tomorrow. I saw an interesting fact today noting that the average mutual fund cash balance is only 3 - 4%. Doesn't seem unreasonable to think that redemptions will cause forced selling in the near future. Link to comment Share on other sites More sharing options...
scorpioncapital Posted August 4, 2011 Share Posted August 4, 2011 "On the other hand, when you add in the devaluation of the dollar the S&P500 is actually down to the level of august 2010" It's down to the level of 13 years ago, but the US dollar was stronger then, so take something like the CDN dollar and it's down to the level of something like 15 years ago. Link to comment Share on other sites More sharing options...
tombgrt Posted August 4, 2011 Share Posted August 4, 2011 "On the other hand, when you add in the devaluation of the dollar the S&P500 is actually down to the level of august 2010" It's down to the level of 13 years ago, but the US dollar was stronger then, so take something like the CDN dollar and it's down to the level of something like 15 years ago. Point taken. :D Link to comment Share on other sites More sharing options...
Myth465 Posted August 4, 2011 Share Posted August 4, 2011 I have little ammo and will have a huge tax bill this year. Perhaps its time to start harvesting losses and upgrading the quality of my holdings. Also its nice to see those with cash going shopping. Speaks to the quality of the board, hopefully you guys arent early.... Link to comment Share on other sites More sharing options...
bluedevil Posted August 4, 2011 Share Posted August 4, 2011 We may be in much better shape than in 2008/2009, but it seems to me like there is a lot of room for the market to go down. If you look at the fundamental valuation metrics -- price to last 10 years earnings, total stock market cap v. GDP, or price to book value of the stock market -- the stock market is significantly overvalued compared to historical norms. I'm sure there's items in the store that are underpriced and you can do well with those items, but there's a good chance that everything in the store will be marked down 30% in the next year or two, and that's assuming the market does not swing into "cheap" territory. So, if i can muster the willpower, i am going to wait. And while I understand that Fairfax's investment dynamics are fundamentally different than the individual investor's, Prem has said that stocks are priced "irrationally". Just my thoughts . . . Link to comment Share on other sites More sharing options...
ECCO Posted August 4, 2011 Share Posted August 4, 2011 As for many of you, I dont have a lot of cash right now. Im thinking about selling some stocks to buy stock that are cheaper (the "sell 5 P/E stock to buy 3 P/E stock" strategie). Even if the stock I sell is at 50% the price it should be, and I buy at 50% the price the other stock should be, I will get the taxe loss. ECCO Link to comment Share on other sites More sharing options...
Guest longinvestor Posted August 5, 2011 Share Posted August 5, 2011 I'm with Bluedevil and Misterstockwell. Did not deploy my 35% cash position today. The fingers are itchy but I am going to force a slowdown in my thinking. This day-to-day enticement needs to be resisted. With multiple, very large global issues at hand and a huge election year upon us, not the time for rush of blood. Not easy, I must admit. Time will tell. Link to comment Share on other sites More sharing options...
Partner24 Posted August 5, 2011 Share Posted August 5, 2011 Those panicking "investors" aren't very rational. Greed/panic cycles are business as usual, but what is particular is how they panick even with the best quality businesses that are available to the public investors, like Wal-Mart, Coca-Cola, etc. etc. etc. who are selling at discounted prices that one would have dreamed to have in the end of the 90's. It's been a trend over the last years, but this trend has gone deeper than I would have reasonably expected. This time what is particular is how quality rhymes with low price. I guess we'll don't see that often. Cheers! Link to comment Share on other sites More sharing options...
DCG Posted August 5, 2011 Share Posted August 5, 2011 The companies I want are not yet at the prices I want to pay for them. I'd like to buy more of the companies I already own shares of, but most of them are still priced quite a bit higher than I paid for them, and I don't usually like to average up too much. I came close to pulling to trigger on MasterCard today, but I already own Visa, and am not sure I need both of them. Regarding selling, in times like this when everyone is selling, I always ask myself the question 'if I owned the whole company, would I sell it?' The answer for pretty much all of my holdings is No, although I did sell half my position in Exxon Mobile yesterday to free up a bit if cash. Link to comment Share on other sites More sharing options...
stahleyp Posted August 5, 2011 Share Posted August 5, 2011 We may be in much better shape than in 2008/2009, but it seems to me like there is a lot of room for the market to go down. If you look at the fundamental valuation metrics -- price to last 10 years earnings, total stock market cap v. GDP, or price to book value of the stock market -- the stock market is significantly overvalued compared to historical norms. And while I understand that Fairfax's investment dynamics are fundamentally different than the individual investor's, Prem has said that stocks are priced "irrationally". Just my thoughts . . . Why do you think the market is significantly overvalued? Before the 10% drop off, I could buy that it is slightly overvalued. Right now, The shiller index is slightly over the long term average at 20.71 vs 45 average of 19.4 (and 130 year average of 16.4) - before this week it was at a higher (though not terrible 22.89) The total market to GDP (actually it's GNP) isn't unreasonably high around 90%, but they usually are pretty close and this site allegedly tracks it: http://www.gurufocus.com/stock-market-valuations.php That comes at 86.4% which isn't all that bad. I'm not sure where to find up-to-date numbers for price to bv, though. Plus, you gotta remember when you're look at valuation, these historical numbers were based on higher interest rates. So, that would mean stocks don't look as highly valued in relative terms, at least. Link to comment Share on other sites More sharing options...
beerbaron Posted August 5, 2011 Share Posted August 5, 2011 Plus, you gotta remember when you're look at valuation, these historical numbers were based on higher interest rates. So, that would mean stocks don't look as highly valued in relative terms, at least. Amen, how high you jump without considering gravity is kinda irrelevant! I'm sure Buffett is starting to feel like an undersexed guy in the Playboy mansion :) BeerBaron Link to comment Share on other sites More sharing options...
BargainValueHunter Posted August 5, 2011 Share Posted August 5, 2011 Don't know if anyone else mentioned it but today probably did not even include average Joe SixPack Americans who are a little slow on the uptake (or are on vacation). One or two more -2% or worse days and the brokerages will be lit up with millions of tiny sell orders from people who still feel bruised by September/October 2008. Also the number of Baby Boomers who can ill afford to be exposed to a collapsing market while almost retired has only increased in the last three years. ...not to mention Bernanke is COMPLETELY out of (politically acceptable) bullets. Going all in now may be WAY to early IMHO. This Europe situation feels like Bear Stearns II...Lehman II is coming around the bend when Germany says, "Nein" once and for all. Link to comment Share on other sites More sharing options...
Liberty Posted August 5, 2011 Share Posted August 5, 2011 I have to say, it's beautiful to see the members of this board go all DEFCON 9 and spring into action when opportunity knocks. This warroom is probably very different from the average "trader" one ;D Link to comment Share on other sites More sharing options...
rranjan Posted August 5, 2011 Share Posted August 5, 2011 I have no clue if we will drop more or not but today was heavy buying day. Just trying to swim best of the ability. Close to running out of ammo but if panic continues then selling stalwart and buying extreamely cheap stuff will come into the play. I think financials are very cheap at this point. People are still comparing it to 2008/2009 scenario which is apple to orange comparison in my opinion. It was for sure a Lovely Frickin' Day. Did not make use of it in optimal way but rough good decisions will work out fine. Happy hunting guys ! Link to comment Share on other sites More sharing options...
augustabound Posted August 5, 2011 Share Posted August 5, 2011 I'm not sure where to find up-to-date numbers for price to bv, though. Like this? http://online.barrons.com/public/page/9_0210-indexespeyields.html Link to comment Share on other sites More sharing options...
stahleyp Posted August 5, 2011 Share Posted August 5, 2011 Buffett has also stated you can only "time" the market a few times in a investment career. According to this site, he's done it 8x over a 56 year career. http://www.valuewalk.com/warren-buffett-berkshire-hathaway/warren-buffett-time-market/ So, over the past 10-12 years, we've had 2000, 2007, and 2009. That's 3 times in a pretty short time frame. Could this be another one already? Maybe. We shall see! I don't think Buffett is calling it this time. He bought Lubrizol just a few months ago, he is still shopping (allegedly), and he discussed a month ago that he did not feel we would have a double dip (http://www.bloomberg.com/news/2011-07-08/buffett-bets-very-heavily-against-second-recession-even-after-jobs-data.html) Now, may he is old and doesn't know much...or people are over reacting. I don't know! augusta, thanks for that! Link to comment Share on other sites More sharing options...
ERICOPOLY Posted August 5, 2011 Share Posted August 5, 2011 I think financials are very cheap at this point. People are still comparing it to 2008/2009 scenario which is apple to orange comparison in my opinion. I found it interesting to see that the financial sector in the S&P500 is less heavily shorted than the average for the index across all sectors. Does this suggest that the market agrees with you? Presumably they'd be heavily shorted if the sentiment was that financial sector is shaky. Link to comment Share on other sites More sharing options...
stahleyp Posted August 5, 2011 Share Posted August 5, 2011 eric, where have you been? I haven't seen you post here in a long time! Good to have ya back (unless you've been here and I just didn't see you!). :) Link to comment Share on other sites More sharing options...
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