Alright, returns of 400% between the bottom in 2003 and now were not only common for many stocks, but conservative. Many small, medium and large cap shares have soared 600% to 800%. Just look at Apple, Phelps-Dodge, Peabody Energy, Marathon, Toyota, AMD, Boeing, or thousands of other stocks. Obviously, in retrospect, the spring of 2003, when people were scared to death of the markets, was an ideal entry point for most speculators and investors. So, what are the odds of ever seeing this kind of 40 month performance stretch again in our lifetimes?
I think it depends on a lot of things, and I've yet to see anyone able to reliably predict the market day in day out. I've believed since 2002 that Nasdaq will hit 5000 again within the decade (by 2010). From what I've seen over the last few weeks, it's on the way. There's a lot that can derail it, but as I said 2 weeks ago, where's the real estate $$ going to go? Where will China diversify their dollar holdings? While it's not clear at all, Nasdaq is a strong bet... the bubble PE's are more or less gone, companies are more stable than in 2000, and if they survived, they've learned, have a better balance sheet and management, etc etc. If the freshly cashed out investors from RE and China think so too... 5000 is not that hard. I thought the money that came out of Nasdaq's crash went into real estate in the first place. 2001 is when the serious real estate appreciation and 'flipping' became really profitable. People tend to prefer what they know, those who made money elsewhere would logically gravitate back to the Nasdaq action of 1998. I wouldn't call a Nasdaq that crawled from the 1300's in 2003 back up to almost 2400 all that good, considering it fell from 5000 to begin with. If Nasdaq begins bubbling again, this time around there will be a ton of jitters compared to last time. Will it be this good again? Barring unforeseen circumstances, I think so.
it also means not limiting yourself to one instrument (stocks) or one market. the S&P is not the "market" anymore than the SPEWI or the DOW. depends. for example, corn has, in the last MONTH or so, risen the equivalent of over 1,000 dow points. when gold was a SCREAMING buy near the end of the 90's, none of the momo tech guys wanted anything to do with it. etc. etc. etc.
1) What is the most truly undervalued market right now? I've read a lot about Russia as being truly undervalued, despite all the accounting and regulatory teething problems they're having. Are any other specific foreign exchanges undervalued? 2) What about the opportunity that a falling U.S. dollar presents, whereby you can hold assets priced in euros, the yuan or other currencies? 3) How can one properly estimate the nominal money flows out of both residential and commercial (which is smoking hot and probably overvalued now) real estate, and what proportion of this cash will flow into commodity and equity markets, versus fixed income instruments? 4) What about bonds? 2003 was a unique time. With the dot.com bubble burst, the crashing of tech stocks generally, and then with 9/11, the market became irrationally depressed - and that is what led to such outsized gains over the last 40 months. I seriously doubt that such buying opportunities come along more than once every 50 years, on average. The DOW has nearly doubled in the last 40 months.
"2003 was a unique time. With the dot.com bubble burst, the crashing of tech stocks generally, and then with 9/11, the market became irrationally depressed - and that is what led to such outsized gains over the last 4o0 months. I seriously doubt that such buying opportunities come along more than once every 50 years, on average. The DOW has nearly doubled in the last 40 months." again, you are using index bias and market bias. typical there are TONS of markets. there are ALWAYS opportunities. if you are only looking at the DOW, then u will only see opportunities in the dow. again, if u want OPPORTUNITIES for big moves, then u must be willing to enter when everybody else hates it. e.g. gold when it was $250. most go-go momo traders and daytraders are not willing to do this. if u want an undervalued market, then of course, u are also using a fundamentals valuation, not a technical valuation, and need to have a longer timeframe. we have electronic access to worldwide markets now, as well as commodities, etc. there are always opportunities. don't limit yourself. also, im not slagging the dow. i make my $$$ trading intraday dow futures, but that's on an intraday basis. i am certainly not INVESTING in it (primarily). i would rather place my investments (longterm) in what is undervalued, not what everybody is currently pimping.
There are opportunities like this everyday, all day long. There are stocks you can buy right now and in 2-3 years they will be up 400%. In 2003, it was fairly easy as everything was depressed. In the present time, there are only select equities that are depressed. I run a daily screen to see which stocks have made new 52 week lows. Everyday there are 10-20 stocks that make those lows. Are these stocks bargains right now? Are they at "the low"? Well, you have to do a little research in order to figure that out. When people get into a stock and it doubles, they usually cash out partially or entirely. I doubt there are many people who would stick around for a year or two patiently waiting for it to go higher. When Hansens was at 2 dollars and then went to 4, there were many people who probably cashed out. When it went over 10, there were probably plenty more that cashed out. Those guys who stuck around to the bitter end are few and far between. I would say out of all those guys that bought Hansens at 1, probably less then 5% stuck it out. If you want to beat the market at its own game, you have to own a single equity for at least 20 years. However, there are not many people on this messageboard or anywhere out there that are willing to do so. Will the market be this good again? Yes it is at the current time. I would pick Marvell and Western Union as two equities that will double in 1-2 years time.
No. But you would have lost your ass if you'd have picked it as your entry point. I mean, that was slaughter. The Naz went from what, 5,500 to 1,100 by 2003?
I can't disagree, but I think the timeline is the biggest disparity between what I'm talking about and the sage advice you give. I probably worded it inefficiently, but I', basically saying that a common stock picker could have easily obtained a 500% return on an equity in the last 40 months or so, when that kind of return would normally take 20+ years, if all went well.