5 Comments

1. trip
   March 18th, 2008 at 10:38 am

   Now, I’m no fan of JC, but… he does make the difference between accounts at Bear and Bear’s stock. Should I move my $5,000 saving account from Citi because the stock is crap? I agree with Jim that it would be dangerous for any talking head to tell people to pull money from accounts at banks protected by the Fed. Any popular finance guru could cause a bank to fail.

   Remember that the market is not the economy. With a nearly 20% decline in the S&P 500 and its forward P/E about 13!! I have been slowly buying with all that cash I was afraid to invest for a year.

2. Kirk
   March 18th, 2008 at 9:19 pm

   For trip,

   A forward P/E of 13 based on current earnings estimates. Each of the past 3 quarters S&P has lowered the outlook on earnings. It will do the same in coming quarters. I recommend looking at normalized P/E ratios as Robert Shiller does. Stocks are still expensive based on that calculation. Also, with earnings at an all time high compared to GDP, it is still risky to go all in with the markets.

   While no one can predict the future, I recommend buying as slow as possible.

3. trip
   March 19th, 2008 at 12:02 pm

   Thanks Kirk,

   I am no investor, nor will I ever be. Good investors can accurately value businesses and companies. I will probably never be good at that. I call myself a ‘prudent saver.’

   Also, any slew of measurements or indicators can be determined to be more important than others. The market is generally a leading indicator for the economy. I am not calling a market bottom by any means. The economy will suffer more. Since this is the vast vast consensus (you can’t watch the news without hearing “perfect storm”), most of that has been unarguably factored into this market.

   The hard part about all of this is that only performance matters. Right? But then you are not allowed to look back and say, “Look at all the good decisions I’ve made” because hubris will lead to really bad decisions. I keep close track of my performance, but what value does it have for me?

   I am sure I am an idiot. However, I like Grant’s blog and try to share my thoughts when I see fit.

4. Grant
   March 19th, 2008 at 6:41 pm

   Hey Trip, thanks for chiming in!

   I don’t think Kirk meant to belittle your investment skills. I think it goes to show that by many different measures you can generate many different philosophies.

   I think a lot depends on your time frame as well. I suspect you’re like me in that you invest for the long run, and by that mean tens of years or so. Consequently, you (like me) see that this is an ample opportunity to buy, even if you’re getting in above the bottom, per se.

   On the other hand, if you’re a bit more savvy, which Kirk seems to be, you might benefit more by waiting until what ever indicator you use tells you it’s time to buy. So be it, as long as your strategy works for you, use it!

   I’ve come to realize in the last couple months that I’m not as smart as I thought I was when it comes to understanding the stock market, and I suspect a lot of people are finding out the hard way that many of the strategies they had in place over the last couple years incorporated more luck than knowledge.

   Anyway, thanks to both of you for your comments, and keep ‘em coming!

   -Grant

5. trip
   March 25th, 2008 at 12:15 pm

   I know. I should not get worked up, but I know I will be proven wrong and should have said that in my first comment. Earnings estimates by S&P only come in three flavors too high, too low, or just right. They can be on the high side only so long. I figure three estimates too high works in my favor… hmmm…

   Mr. Ritholtz agrees with my comment on JC.

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