Okay, I'm sure that many of you know more about this subject than I do. So Explain: As I write this at 3:38 on Friday, the Naz and the DJIA are up. It is what the morning calls predicted. Still the fundamentals don't support the prices.

People who worry about these things tell me that there has been a fundamental change in market dynamics. There was a time when changes in stock prices [within reasonable bounds] were unimportant. Increased value came from, earning dependent, dividends. Actually a small decrease in share value could be good since re-investment gave one more future dividends.

In contrast, at the present, all value increase comes from the increase in share value and not dividends. In a global market, this can be less earnings sensitive.

This is oversimplified, but would you care to comment.

Best Wishes,,,,

Z

-- Anonymous, March 23, 2001

Answers

One last thought. It is almost like the trading of gold in the past. Where value wasn't linked to actual use [unlike today]. Seems to be the reason that all of the gold bugs are on welfare.

In other words, it seems to me that the shares are being traded like commodities and not like performance units. Of course my dog knows more about this stuff than I do.

Both my dog and I will be interested in your responses.

Best wishes,,,,

Z

-- Anonymous, March 23, 2001

The rules of investing have not been changed. They were forgotten by people who thought walking on water that was not frozen was routine. Now they are drowning. Go read the writings of Warren Buffet and better yet, his bed time companion: Graham and Dodd. Then time your purchases based on a good book on "technical analysis". If that is too hard, invest in the top companies in industries you understand ONLY by "dollar averaging" equal amounts over time. If you are in a 401K you should be able to double your money every 8-12 years and by compounding all earnings and stock divs. you can do a bit better. If one of the companies goes stale or out and out bad, replace it.

IF everyone could out perform the average, everyone would be rich. Few people are really rich. Many are only comfortable.

ALL successful investors "make their money on the way in". They buy so that there is little if any downside risk and then take a ride until the stock or asset rises to what they think it is worth. Those expecting profits based on the "Great Fool" theory ARE the greater fool. Bottom Feeders get rich. Top feeders end up on the dinner table after they are killed.

ALL investments sell on YIELD and expected YIELD. Period. If you can find money in a stock hidden in the balance sheet or cash flow or "cash value" in hidden assets undervalued on the books and the management doesn't spend it sooner or later, you can cash for net asset value or more. Irwin Jacobs, Carl Icahn and Warren Buffet do it routinely. Sam Zell in Equity Office does it in real estate.

The sales pitch for companies who ploughed back their profits and did not pay dividends was that "eventually" they would pay dividends and in general, the winners did. IF you put $25/month into the DJIA every month for 30 years, you will make money. Whether you will do better than inflation is problemmatic. The same is true for residential real estate and I can prove that RE **ONLY** keeps pace with inflation over time.

The shills and touts for the VCs and investment bankers are paid to sell stocks. Their "opinions" are (or should be) greatly discounted. Common sense tells you that "if everyone knows about it" the possibility of making money in something is rather low. The reason is obvious.....who in the world would be left to sell it to at a higher price? The dotscam/bomb was another in a long series of people paying for hopes and dreams rather than earnings. I have seen it since XRX and PRD sold at 100X earnings in the 1961 bull market of "high tech stocks". FORTY YEARS AGO, we were pushing "high multiples for growth". There can only be a few winners. I have yet to see anyone make money over time who did not know and understand the companies they were investing in. That is why Mutual Funds are the vehicle of choice for most people. Those who buy on GREED assuming more greedy ones will take them out at higher prices usually loose.

The trick is to take a ride at seemingly silly prices on the way up and smell when the game is over. That is not easy.

Read what Warren Buffet has written about how to invest or the WB speeches that are usually in the annual report for his Berkshire Hathaway. He buys based on applying the rules of what is considered the founding book on Security Analysis by Graham and Dodd.

Nothing has changed and G&D has not been repealed. The fundamentals of profit must be there and the valuation methods of P/E are a function of "expected growth" discounted in advance.

TIMING in "investing" is everything. When every bartender, waitress and cab driver is discussing stocks, gold or real estate, it is usually time to bail. Life is "Wholesale" and "Retail".

-- Anonymous, March 23, 2001

CPR:

I actually understood your response. Thanks.

Cheers,,,

Z

-- Anonymous, March 23, 2001

You won't get a better answer Z.

-- Anonymous, March 24, 2001

Here is some sad news for all Capitalist Pigs::

Enron stock slides despite earnings reassurance

Shame Ken Lay will probably have to cutback on Enron's donations to the Ronald McDonald house and Earth Day activites "going forward".

-- Anonymous, March 24, 2001

Jesus, Doc you really are a commie. Ever got a paycheck from a poor guy?

-- Anonymous, March 24, 2001

Charlie said it best.

The stock market is an up-trend over history. No need to try and outsmart it, unless you're a guru and can do the quick-shake. But that's risky, and you'd best have throwaway $$ to risk.

Let's not even get into commodities......

-- Anonymous, March 25, 2001

"Ever got a paycheck from a poor guy"

Nope but most Corporations do Carlos. See unlike the Corps, we hardworking peasants have to pay our taxes even if we show a loss. Even if we have a "bad quarter".

Poor folks and Rich folks understand to get ahead, one has to become a bloodsucker(called working the system). The day individual rights and standing were corrupted, was the day America went south. Legal entities have far more standing in the eyes of the law than you. They get perks you could only dream of. Same holds true for poor folk. Hell illegal immigrants have more "rights" than you Carlos in many areas. Is this a mystery to you?

Labor and creativity produces. It be swell if our system still respected that.

But nevermind... and America continue to tell your kids to hold values that you yourself leave at the door when you toddle off to work each day. But please do cut these kids some slack when they call you what you most certainly are...HYPOCRITES.

-- Anonymous, March 25, 2001

Huh. This isn't a question type huh just a basic generic type huh.

Doc, you ain't makin sense.

The machine is in place. We're all gonna have to live with it or go munch grass somewhere. Slapping it on course from left and right is what we do in a republic. Burns both our asses from time to time but it seems to work. Don't get scared just let it work out.

-- Anonymous, March 25, 2001

Then Carlos why all the chest pounding over Morals? Why bother?

May I suggest it is because many hold the same morally bankrupt philosophy you do? That "things" are more important than people and ideas? That "toys" matter? That many are so lame they actually live the 30second commercial lifestyle?

No wonder they whine for morality, they have none.

-- Anonymous, March 26, 2001