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Don t Get Fooled Again
Posted by: AlbertaSunwapta (IP Logged)
Date: September 12, 2013 11:12AM

So this is that specificity that you're aiming for in these thread discussions:

"1. US equities are in a relatively balanced state (contrast with 2000)
2. The general atmosphere in the financial markets is one of caution, where no-one is acting carefree and unaware of potential dangers (contrast with 2006-7) "

Or, coincidentally, today we can look at the less vague and woolly thoughts from another fairly successful investor. Here's what Druckenmiller just said:

“I really don’t care whether we go to $70 billion or $65 billion in September,” Druckenmiller said. “But if you tell me quantitative easing is going to be removed over nine or 12 months, that is a big deal.”

The purchases have subsidized all asset prices, he said, and completely stopping them would mean “the market will go down.”

[www.bloomberg.com]

My comments above mentioned the predictability of profit margin mean reversion and stock selection based on cash flow and balance sheet strength (Whitman) to avoid interest rate financing exposure. I also simply asked who will replace the Fed when they stop buying (the end of ZIRP). I also highlighted this fall's (and likely many more for several years to come)... upcoming US budget negotiations and the possibility of a repeat of prior knee-jerk market reactions. Vague and wooly, meandering thoughts, yes. Of course, we need not worry, ZIRP will in reality live forever. :-)



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Don t Get Fooled Again
Posted by: vgm (IP Logged)
Date: September 12, 2013 11:53AM

AS -- LOL! You not only misunderstand, but you misrepresent. Please re-read Russell.

Good luck.


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Don t Get Fooled Again
Posted by: AlbertaSunwapta (IP Logged)
Date: September 14, 2013 07:24AM

Please explain.
;-)

That was a direct quote from your post.

Anyway, back to the thread premise. Personally, I don't see measures of cheapness or reasonable market value implying a short-term movement towards full valuation. Cheap stocks can become even cheaper and so can markets. At the short-term May market peak, investor concerns over a pulling of the great subsidy arose. I don't know if those fears have disappeared. Owning the market and hoping for continual short-term price recovery and/or further price gains based on leveraging today's artificially low financing rates in my view is risky. Owning specific companies substantially immune from market concerns of course is far less risky.

I do agree with Price that the recent high is very different from the prior two peaks. That should be expected, and market technicians and chartists pointing at peaks and equating them is meaningless. Any prior market level can be substantially overshadowed by the next upward cycle for any number of reasons and the fundamentals driving each cycle can have little to no correlation with the prior peak.

And now a quote highlighting the fuzziness required when thinking of the future but the concern that history sometimes may rhyme... Prem Watsa on hedging...

" And the second is just because we are all here very big fans of Ben Graham, Ben Graham said in 1925 -- in the '30s, he said, after the Crash, after the Depression took hold, that if you weren't bearish in 1925, there was a 1-in-100 chance you'll survive the Depression, 1-in-100 chance. If you weren't bearish long before 1929, meaning 1925, there was a very small chance you survived. So we are very concerned. We don't take this lightly. We're watching this very, very carefully. I mean, if we hadn't hedged, we'd make, I don't know, another $500 million, something like that. Now we can easily buy corporate bonds. We've been in the business for 40 years, and they're stepping away. We think you're not being paid for risk, so we're stepping away from the marketplace. I'll remind you, then, in 2008, 2009, when stock markets were down, we were fully invested. And when spreads were wide, we bought corporate bonds and we bought all sorts of bonds. Today, we think there's a significant amount of risk, and we think you have to be very, very careful. And there's all sorts of unintended consequences in the marketplace because of what's happening in the United States, particularly, but perhaps elsewhere. And so this is our way of protecting ourselves, like we did with our credit default swaps, and just being very, very careful." - Prem Watsa, August, 2013 Transcript source: SeekingAlpha

[seekingalpha.com]


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Don t Get Fooled Again
Posted by: vgm (IP Logged)
Date: September 14, 2013 06:27PM

"And now a quote highlighting the fuzziness required when thinking of the future"

AS -- please understand that this has zero to do with fuzziness. It reflects a range of outcomes of the kind Howard Marks also talks about. It's good stuff as always from Prem Watsa. I can't think of anyone less fuzzy than Prem.

You just don't get it. It's YOUR rambling unfocussed thoughts I've been referring to and which you need to look at. Not Prem Watsa. He's doing OK :-)

Goodbye. Good luck.



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