casuallynx8 said:Most of the P/E ratios and ROE figures were pulled from Bloomberg, though I manually calculated a few specific companies myself. For Chevron and NASDAQ, however, I couldn't be bothered to dig through all the Q4 '06 data, so those P/E numbers are based on full 2006 results. (Chevron’s performance in '07 mirrored '06 quite closely, so the P/E holds steady there, though I'm less certain about NASDAQ)
Pension funds certainly played their part in this correction, but honestly, even without them, the market was bound to hit a breaking point where it would simply collapse under its own weight. It was inevitable. If they hadn't intervened, the fallout likely would have been significantly more catastrophic than what we're seeing now.
Regarding active trading, there is a rather fascinating statistic to consider: "From 1966 through late 2001, one study claimed, $1 held continuously in stocks would have grown to $11.71. But if you had gotten out of stocks right before the five worst days of each year, your original $1 would have grown to $987.12"
It sounds enticing, doesn't it? But the question remains: who can actually predict those five worst days? Who among us exited entirely into cash in October or December, anticipating this exact scenario? Personally, I moved my money out of funds in November—not long before the local bottom—but I'd call that more luck than intellect. That move was less a logical deduction and more of a gamble; what truly spooked me back then was the combination of Jack Welch's leadership at the firm and the tension in Mexico. So, let's just call it pure luck.
I recall Walter mentioning how he exited HDFC at 2000 because he realized a stock with a P/E over 100 and a price at only 8 times book value was essentially a bubble waiting to burst. I believe he mentioned elsewhere that he also exited a fund after it yielded massive gains in a very short window. To that end, Walter 🙏, I would love for you to enlighten us more on your methodology for recognizing when it's time to run for the exits 😁
Suppose a miracle occurs and by year-end, the Nasdaq surges to: a) 5000 b) 5500 c) 6000 points. Who would: a) retreat to cash; b) sit tight and hold exactly what they have; or c) beat themselves up for not buying more heavily at these levels—even if it meant buying on margin—only to start panic-buying during the height of the euphoria?
1. Personally, I feel like this whole correction period is a pretty vital lesson for all of us,
since it really shows just how fast things can go south and, I guess, it gives us a taste
of how long we might actually be stuck waiting before we can finally exit to cash.
2. If the Nasdaq somehow climbed to 5000-5500 by year-end,
I’d probably dump everything I own, except maybe for those specific stocks where you can
actually justify that there's still room to run.