Comments on: Weekend reading: On 2009 and 2010 http://monevator.com/weekend-reading-on-2009-and-2010/ Make more money, invest profitably, retire early Thu, 24 May 2012 00:24:09 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Rob Bennett http://monevator.com/weekend-reading-on-2009-and-2010/comment-page-1/#comment-20431 Rob Bennett Mon, 04 Jan 2010 16:22:53 +0000 http://monevator.com/?p=3211#comment-20431 There are lots of people who say that short-term market predictions are a waste of time. Yet just about everyone continues making them and reading them. Huh? The reason (I believe) is that today's conventional wisdom on why stock prices change suggests that short-term price changes reflect economic realities -- and thus are of great significance to investors. It's like telling a dog not to bark to tell an investor to ignore price changes that hhe believes reflect economic realities. I think that the way to truly ignore short-term price changes is to accept that they really are of no significance. In the short-term, prices are set by emotion. It is only in the long-term that prices reflect economic realities. And in the long-term stock prices are highly predictable! We should be predicting what we can predict effectively. We should drop the Buy-and-Hold model of understanding how stocks work and move on to more realistic ideas and strategies. Rob There are lots of people who say that short-term market predictions are a waste of time. Yet just about everyone continues making them and reading them. Huh?

The reason (I believe) is that today’s conventional wisdom on why stock prices change suggests that short-term price changes reflect economic realities — and thus are of great significance to investors. It’s like telling a dog not to bark to tell an investor to ignore price changes that hhe believes reflect economic realities.

I think that the way to truly ignore short-term price changes is to accept that they really are of no significance. In the short-term, prices are set by emotion. It is only in the long-term that prices reflect economic realities. And in the long-term stock prices are highly predictable!

We should be predicting what we can predict effectively. We should drop the Buy-and-Hold model of understanding how stocks work and move on to more realistic ideas and strategies.

Rob

]]> By: The Investor http://monevator.com/weekend-reading-on-2009-and-2010/comment-page-1/#comment-20429 The Investor Mon, 04 Jan 2010 16:07:27 +0000 http://monevator.com/?p=3211#comment-20429 @Mat - I wouldn't say "the only reason"... valuation is the best reason if you're going to be foolish like us and try and have an opinion on the market. What gets dangerous is when people start to use off-market metrics, like "the Internet" or "India" or "plastics" or "the railroads" or "mysterious operations in the South Seas" ;) @Mat – I wouldn’t say “the only reason”… valuation is the best reason if you’re going to be foolish like us and try and have an opinion on the market. What gets dangerous is when people start to use off-market metrics, like “the Internet” or “India” or “plastics” or “the railroads” or “mysterious operations in the South Seas” ;)

]]> By: Mat http://monevator.com/weekend-reading-on-2009-and-2010/comment-page-1/#comment-20419 Mat Mon, 04 Jan 2010 14:11:26 +0000 http://monevator.com/?p=3211#comment-20419 I felt a recovery was headed our way in 2009. But the only reason I thought it would recover is because the drop was a little too extreme. I have to admit that the current recovery in the market may overshoot it's true value. Except, of course, Monster Worldwide, which I believe will outperform. : ) I felt a recovery was headed our way in 2009. But the only reason I thought it would recover is because the drop was a little too extreme.
I have to admit that the current recovery in the market may overshoot it’s true value.
Except, of course, Monster Worldwide, which I believe will outperform.
: )

]]> By: The Investor http://monevator.com/weekend-reading-on-2009-and-2010/comment-page-1/#comment-20229 The Investor Sat, 02 Jan 2010 18:46:22 +0000 http://monevator.com/?p=3211#comment-20229 Re: The fund, I've submitted another entry already -- Monster Worldwide! :) Re: The fund, I’ve submitted another entry already — Monster Worldwide! :)

]]> By: The Investor http://monevator.com/weekend-reading-on-2009-and-2010/comment-page-1/#comment-20227 The Investor Sat, 02 Jan 2010 18:44:43 +0000 http://monevator.com/?p=3211#comment-20227 <em>What’s your one strongest gut prediction for the UK?</em> Well, it might not translate too well across the pond where perhaps you haven't been exposed to the dire news about the UK, but my main contrarian gut feeling is that economic growth in 2010 here will be much stronger than is currently forecast by most commentators and City analysts, though not by the Treasury itself. It's a similar situation to the US; people are mistaking the debt burden the country has to carry forward with its capacity to generate output. The trouble for both the UK and the US is that like a person who bought a house at the top of the bubble with an expensive mortgage, we're going to take years to pay down our debts and won't be able to spend the money on other things (new TVs / new hospitals) -- not that we'll find it impossible to generate the income to pay down those debts. What’s your one strongest gut prediction for the UK?

Well, it might not translate too well across the pond where perhaps you haven’t been exposed to the dire news about the UK, but my main contrarian gut feeling is that economic growth in 2010 here will be much stronger than is currently forecast by most commentators and City analysts, though not by the Treasury itself.

It’s a similar situation to the US; people are mistaking the debt burden the country has to carry forward with its capacity to generate output. The trouble for both the UK and the US is that like a person who bought a house at the top of the bubble with an expensive mortgage, we’re going to take years to pay down our debts and won’t be able to spend the money on other things (new TVs / new hospitals) — not that we’ll find it impossible to generate the income to pay down those debts.

]]> By: Financial Samurai http://monevator.com/weekend-reading-on-2009-and-2010/comment-page-1/#comment-20224 Financial Samurai Sat, 02 Jan 2010 17:36:44 +0000 http://monevator.com/?p=3211#comment-20224 Oh, btw... I'm wrapping up the Samurai Fund launch tomorrow for Monday. I'm sure you will be able to come up with another idea instead of MON! Oh, btw… I’m wrapping up the Samurai Fund launch tomorrow for Monday. I’m sure you will be able to come up with another idea instead of MON!

]]> By: Financial Samurai http://monevator.com/weekend-reading-on-2009-and-2010/comment-page-1/#comment-20215 Financial Samurai Sat, 02 Jan 2010 16:11:23 +0000 http://monevator.com/?p=3211#comment-20215 If only I took out a 2nd, 3rd, 4th mortgage on my properties and dumped it all in the stock markets last March! lol. Just gotta stay in the game I guess! What's your one strongest gut prediction for the UK? I have a feeling it's that you believe your investment bankers will make big fortunes again! If only I took out a 2nd, 3rd, 4th mortgage on my properties and dumped it all in the stock markets last March! lol.

Just gotta stay in the game I guess!

What’s your one strongest gut prediction for the UK? I have a feeling it’s that you believe your investment bankers will make big fortunes again!

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