Thursday Outlook: Commodities, Global Markets [View article]
Dave, Thanks for all your great postings, and don't worry about not posting. Medical science has greatly advanced, and Hopkins is amongst the best in the world. Keep up the faith and God bless Francine and you.
I agree that coal will continue to play the major role in the US energy future. However, environmental issues now have momentum, and the cost of mitigating coal emissions is going to remain high. Using coal will become much more expensive if and when it is decided that CO2 has to also be mitigated.
Coal stocks had been in a gigantic bubble, along with other commodities. They came back to earth in November/December, and I bought several with the intention of holding them long-term. Since then, they've moved up quickly, almost doubling in a couple of weeks, so I just sold them and took a decent profit. I just think their current valuations, though a fraction of the bubble's high, are a bit pricey in terms of dividend yield, and in relationship to cheap natural gas.
I agree that recessions are buying opportunities for stocks that have been artificially depressed to below their intrinsic values. Problem is that intrinsic value is subjective, and reasonable people will have different opinions.
Another problem is that the vast number of people whose livlihood depends on the public always buying stocks and mutual funds act as salesmen for the market, frequently under the guise of objective research. This slants stock valuations and tends to push them above their intrinsic value based on the company's long-term cash flow and dividend yield. Recent history is full of examples of stocks that were touted as excellent values by "the smartest people on the planet", only to fall back to their intrinsic value, which is frequently a modest fraction of what the misguided public paid for them. I am sure you remember JDSU, CMGI, INTC (great company, but not at $80), CSCO (another great company, but not at $75) and the list goes on.
The mere fact that a stock has fallen considerably does not in itself make it a good value. It may just be a manifestation of something that came down from an extreme overvaluation to a more modest overvaluation. At the present, I see a great many stocks that are still quite overvalued, despite their fall. Buying them now will be just like buying INTC at $40 in 2001 just because it had just fallen from $80.
(disclosure: Long-term, buy-and-hold investor in INTC, all entry points in the low and mid teens).
Thursday Outlook: Commodities, Global Markets [View article]
The Future of Coal Looks Promising [View article]
Coal stocks had been in a gigantic bubble, along with other commodities. They came back to earth in November/December, and I bought several with the intention of holding them long-term. Since then, they've moved up quickly, almost doubling in a couple of weeks, so I just sold them and took a decent profit. I just think their current valuations, though a fraction of the bubble's high, are a bit pricey in terms of dividend yield, and in relationship to cheap natural gas.
Are Recessions Really That Bad? [View article]
Another problem is that the vast number of people whose livlihood depends on the public always buying stocks and mutual funds act as salesmen for the market, frequently under the guise of objective research. This slants stock valuations and tends to push them above their intrinsic value based on the company's long-term cash flow and dividend yield. Recent history is full of examples of stocks that were touted as excellent values by "the smartest people on the planet", only to fall back to their intrinsic value, which is frequently a modest fraction of what the misguided public paid for them. I am sure you remember JDSU, CMGI, INTC (great company, but not at $80), CSCO (another great company, but not at $75) and the list goes on.
The mere fact that a stock has fallen considerably does not in itself make it a good value. It may just be a manifestation of something that came down from an extreme overvaluation to a more modest overvaluation. At the present, I see a great many stocks that are still quite overvalued, despite their fall. Buying them now will be just like buying INTC at $40 in 2001 just because it had just fallen from $80.
(disclosure: Long-term, buy-and-hold investor in INTC, all entry points in the low and mid teens).