I'm heavily invested (relatively speaking) in tech stocks and tech stocks continue to tumble. Normally I wouldn't worry as the market naturally fluctuates. However, from what I hear, many feel that this tumble is here to stay. My personal approach is that I will start to sell once my stocks drop 20%. Will you guys stick with the market, or will you sell a little?
yeah, i would be worried. i think we're starting to see the effects of rising energy prices across the board, and i think they're here to stay. i moved a bit of my money into international stocks, but i don't think those are safe either. i'm anticipating moving to bonds for a bit until thinks stabalize.
If you plan to hold them for short-term, yeah, be worried. If you plan to hold them for 10 years, don't even sweat.
Once the price of a stock drops 20%, you should be buying more shares, not selling (assuming underlying earnings didnt drop more than 20%).
Myself and my firm has been shorting the markets quite a bit, and we will continue with it for some time. I personally have moved all my families monies into safer venues such as cash and fixed income during the past 10 days. I anticipate the markets heading quite a bit lower.
I wouldn't bet too heavily on international stocks. Cheap bank money is drying up across the world for the first time in a long time. Also, I wouldn't plunge too deep into futures. China's demand for commodities might not be voracious as we've seen the past couple of years. There's quite a bit of uncertainty for the average investor.
OMG. Would you switch back if the market fell 10%? 20%? 30%? The point is that the buy and sell times are not always self evident. For all we know, the stock market may bounce back next week. My own portfolio is still up for the year, but I am more diversified than just tech stocks. The only thing I might do if we are indeed in a serious market correction (not my bet btw) is to rebalance.
I'm hearing more and more people forecasting a China crash...starting with their banks who are famous for lending money without proper risk analysis behind it.
I anticipate the markets heading quite a bit lower. More big picture info ... The SP500 PE at the end of May was 17.49. It has been over a decade since the valuations have been this low. The historic average is closer to 15. For the last year or so the PE has been drifting lower. (This translates into the prices has not been increasing as rapidly as the earnings, ie the P is trailing the E.) My bet is that this valuation trend will continue.
I don't get it, if historic pe is 15, isn't 17.49 too high? Or is it low compared with last few years?
Problem is that mutual funds are long- only and can't short. I have most of my money in my 401(k) plan and mutual funds and don't have that option. If you have enough money you can put it into hedge funds who can short, but you have to have a lot of money.
exactly right!!! this so often gets overlooked. and i realize i'm the only freak who thinks that the high energy costs are NOT here to stay. but i still believe they're NOT. they're based entirely on fears right now. demand is levelling off. supply is not a problem....it will be less of a problem as Gulf Coast facilities become more and more back on line. i'm hopeful we'll reach something we can live with in regards to Iran..that we won't see a war there, frankly because the US doesn't have the political capital to pull that off right now. i'm hopeful we won't have a rita and katrina storm across the Gulf this summer. and i'm hopeful that as every week passes, the cost of oil will get lower...and the price at the pump will be poised for a fall as we get past the summer months.
The SP500 PE last year was about 20. In the heyday of the late 90s, the PE was mid thirties. The year after the 911 it actually drifted into the 40s. Over the last five years since then, the PE has steadily drifted downward, even though the SP500 has had a positive return. Is 17.49 too high? No. The valuation reflects investors current expectations, which are subject to change. Investors expectations have been trending downward while the SP500 returns are increasing. Essentially, the SP500 PE is returning to its historic average in an up market. Here is the way I look at it. There are two components to a stock's price (in the small) and the SP500 index value (in the large). The first component is an intrinsic value, usually based from the earnings stream and the book value (think liquidation value). The second component is speculative: what investors are willing to pay to own the intrinsic value. If the SP500 PE stays stuck at 17.5 while earnings grow at 7% and the SP500 Index grows at 5%, getting out of the market due to high valuations may not be the best move. You would miss the SP500 earnings growth, albeit at a reduced rate.
