Investing techinques

DDHv wrote:FWIR, this applies to short time spans, while in the long run, the noise tends to cancel out, and there is at least a little connection with reality. This also includes much oscillation due to fads and panics, as you say

All the ones i´ve seen ran for at least a year, both the (actual) dartboard and the monkey ran for at least 5 years(dunno beyond that, didn´t keep track).


I stopped believing in those "connections to reality" when the stock of a company plummeted the day after they got their first major contract, a deal that gave them steady work and excellent profit for half a decade.
Even checking it up, i never could find a reason for that drop. And while it´s easily the most extreme thing i´ve seen personally, it´s nowhere near the only one.

Tenshinai wrote:All the ones i´ve seen ran for at least a year, both the (actual) dartboard and the monkey ran for at least 5 years(dunno beyond that, didn´t keep track).


I stopped believing in those "connections to reality" when the stock of a company plummeted the day after they got their first major contract, a deal that gave them steady work and excellent profit for half a decade.
Even checking it up, i never could find a reason for that drop. And while it´s easily the most extreme thing i´ve seen personally, it´s nowhere near the only one.

So either the execs cashed in and banked their profits, or the street expectation was even larger contract for even more work. Or like some dot coms reality set in and the stock was way over-valued before the contract.

He speaks to demand. Younger workers are in the accumulation stage of life. They spend on homes, transportation, children and many things that older folks have had the time to accumulate. This group does not save nearly as much as older workers. Most of their income is spent on goods and services, which keeps production going.

His point is that those nations he cites have the consumption demand internally to grow their economy. Older nations do not have that internal demand and must export to grow their economy. Absent free trade, foreign exporters to a market are at a disadvantage to domestically produced goods and services.

The good news is that between repatriated funds from offshore profits of domestic firms and the
Foreign Direct Investment from people looking for secure environments top move their wealth, the US will have a significant increase in manufacturing of all sorts. I especially look forward to heavy manufacturing and steel production.

So, pick and choose your foreign investments wisely and be prudent to a fault.

Imaginos1892 wrote:

PeterZ wrote:Consider this macro picture before you finalize your selections of stock and exit strategies.

One thing in that article jumped right out at me: 'consumption-led growth'

Ain't no such thing.

Without production, there can be no consumption. All value is created by four sectors of the economy: farming, mining, manufacturing and construction. When they are strong, so is the economy. When all the value creation is done in other countries, when all that happens in your country is adding cost, your economy is in trouble.

I left out one word. Sorry. I buy stock in solid manufacturing companies that pay a decent dividend. If they don't make something, I tend to give them a pass. My only recent exception to that rule was a couple hundred shares of AT&T.
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If a ship can cross the ocean in 10 days, that doesn't mean 10 ships can cross it in one day.

WeirdlyWired wrote:
So either the execs cashed in and banked their profits, or the street expectation was even larger contract for even more work. Or like some dot coms reality set in and the stock was way over-valued before the contract.

Nope and nope. Since that contract they´ve just kept doing great, company growing nicely, and the contract was unexpectedly good and big.

Yet after they got the contract, their stocks dropped to about 1% of their previous value over a few months, no visible reason, not just no GOOD reason, but no reason what so ever, and the stocks have only recovered a tiny bit of that loss even now, well over a decade later.

But the company is doing great, IIRC it´s over 10 times as big now, well settled into their market with a steady stream of contracts and constant profit ever since they got that first big deal.

Compared to similar companies, their stocks before the crash were at a fairly normal level, maybe a tiny bit overvalued, but definitely nothing like the 99% they dropped.
And it´s uncertain enough that calling them UNDERvalued at the time wouldn´t raise any eyebrows.

Trust me, after i saw that weirdness, i spent a lot of time trying to figure out the reason behind the extreme drop. Never found any.
Asked around a bit, noone had a good explanation either.

But like i said, that one was just by far the most extreme i´ve seen, weird stuff like that happens much too often.


And BTW, haven´t you ever considered why it´s a bigger deal to the price of a stock how much it lives up to expectations rather than how profitable the company is, or how well it´s going?
It´s always just so ridiculous seeing stocks fall sharply because some idiots had unrealistic expectations(or wishful thinking), when the true value of the stock is already accepted as likely being higher, simply because the company is doing so well...

Stockmarket has long since left any connections to reality far behind. It has little to nothing to do with investment any longer.

I have a number of investment strategies and separate lines to keep diversified.
One chain over many years that I was actually either very lucky (or maybe a little smart) in involved some shares in a media company I had that overnight doubled in value (dropped to worthless a month later) -
I sold them (original price $1.70, recent price $6.50, sold at $13), I then bought a house block from a government sale for $10k, sold it a year later for $22k, then bought a few hundred acres for $46k (loan involved), ran cattle there for five years which paid off the loan, then sold it for $85k, bought an investment rental house for $75k, after about 8% returns for 17 years sold it for $230k, now today am taking that money and additional cash to sign up for a $300k house that is valued well above that.
I've got other interests but that one is the easiest to track.

Daryl wrote:I have a number of investment strategies and separate lines to keep diversified.
One chain over many years that I was actually either very lucky (or maybe a little smart) in involved some shares in a media company I had that overnight doubled in value (dropped to worthless a month later) -
I sold them (original price $1.70, recent price $6.50, sold at $13), I then bought a house block from a government sale for $10k, sold it a year later for $22k, then bought a few hundred acres for $46k (loan involved), ran cattle there for five years which paid off the loan, then sold it for $85k, bought an investment rental house for $75k, after about 8% returns for 17 years sold it for $230k, now today am taking that money and additional cash to sign up for a $300k house that is valued well above that.
I've got other interests but that one is the easiest to track.

Tenshinai wrote:snip
Trust me, after i saw that weirdness, i spent a lot of time trying to figure out the reason behind the extreme drop. Never found any.
Asked around a bit, no one had a good explanation either.

But like i said, that one was just by far the most extreme i´ve seen, weird stuff like that happens much too often.
snip

Looking for this kind of weirdness is a viable strategy, provided you are very careful about the due diligence. FWIR, the long run for well planned investing is the 5>15 year range. Shorter times are for speculating or gambling. Too many do not know the difference between these three. In the next few years the wierdness of over borrowing is going to roost! I read of one investor whose strategy was to invest in necessity producers most of the time, but when a credit crash produced very high rates on AAA bonds, he would sell, even at loss, and transfer the cash into bonds. Investing is a probability pattern, but does't follow the normal pattern since there are too events at the extremes. Finding an unreasonable outlier can produce good results. Small position size when uncertainty is high is very important

Daryl wrote:snip
He speaks to demand. Younger workers are in the accumulation stage of life. They spend on homes, transportation, children and many things that older folks have had the time to accumulate. This group does not save nearly as much as older workers. Most of their income is spent on goods and services, which keeps production going. snip

This is the core of Harry Dent's methods. In the USA, Dent says problems until the early 20s, then growth again!

Daryl's uber-strategy of multiple strategies with separate lines is great! One strategy produces cash other ways, then invests into good real estate deals. Buy four houses, then trade them up for a hotel! We are late starters, since no one taught us about investing. Most current income is from SS, which we don't trust (http://thesovereigninvestor.com/exclusi ... /?z=583499); 15% of our income comes from a quarter we rent out, a little comes from side jobs during retirement, another bit comes from "Mother Earth News" type cost reduction, and I'm working on developing paper investing. At present, there are more "learning moments," AKA blunders, than are nice, so I'm working on not repeating any