I stand corrected in total humility ;^)

Discussion in 'Economy' started by Neubarth, Aug 3, 2009.

  1. Neubarth

    Neubarth At the Ballpark July 30th

    Nov 8, 2008
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    South Pacific
    On a stock message board today, I saw the reason for the insane rally that we have witnessed in the past month (A rally above and beyond normal Bear Market Rallies). This morning I gave up on trying to guess when the market was going to turn and go south. In stock investing they have a saying, "Never try to catch a falling sword." It is about guessing when a falling market will stop and turn around. I guess it applies to a rising market, too.

    I may not have the exact words right, but the messate went like this.
    "Old people and senile old investors, you just don't get it.
    Price to Earnings just does not matter anymore!
    It is of no importance in the modern investing world.
    What matters is stock momentum.
    Who cares if they have any earnings at all.
    It is all just a bet on stock performance.
    So, go take your price to earnings and shove it where the sun don't shine."

    The actual wording was a little bit more cruder than that, but it caught his attitude very well.

    If that is the attitude of the younger, more modern investor, it is time for me to get out of the market. I don't think I could make myself think that way. Gosh, I wish stocks did that when I was a young investor. I always watched Price to Earnings and when a company posted higher earnings, the price of the stock went up.

    Now, it does not matter. Many of the companies that are going up in price have no earnings. They are just going up with the "Momentum." I am going to stick with bonds for the time being. Of course, I am near retirement age and that is what we are supposed to be doing just before Social Security sets in.

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