Quote:
Originally Posted by iDumb
i think the investment opportunity of the decade has just pass last decade 
the algorithm trading makes for dramatic market move. 10% in a week. For the year dow is down only 10% - big deal.
if you think this is 2008 to 2009 level of activity you haven't properly lived through it probably saw from sideline.
will remain 100% stocks in 2019.. Full blown contributions are set in motion.
anyways, in your PE example you should be looking at forward PE. Based on that market was fairly priced. Can't really go with such rudimentary metrics.
|
In a round about way you are saying you mostly agree with what I stated
. The reason I called it the opportunity of the decade is because 2008-2009 was the opportunity of a lifetime. Regarding valuation, I used a simple analogy so that folks who aren't into the nitty gritty of finance can easily understand. When it comes to evaluating a company, say for a merger or acquisition deal, deal makers don't even look at PE, they look at EBITDA. One of the line items they remove from earning is Taxes. 2018 was largely driven by tax breaks compared to years prior. From that perspective alone one could see real growth was slowing. The most important thing to me however was the guidance provided by companies like Apple and Accenture who are projecting IT spending cut by corporations.
I used to closely work with equity research analysts back in my M&A days. In my experience analysts do a poor job of predicting Forward PE when markets reach inflection point. This is due to the fact that they tend to follow a herd mentality to reach consensus. If they get it wrong they can point to consensus where as if they call out the canary in the coal mine and get it wrong they have no place to hide. Once a few brave analysts break the trend only then others start jumping on the bandwagon. Aside from algorithmic trading, this is another reason why stocks tend to overshoot on the downside.
I still believe we're in a secular bull market. I won't be surprised if Dow hits 50k in 5 yrs but I can totally understand why the valuations are where they are right now and could get even cheaper.