Dont think the value of stocks will go down that much more than the last one (49%), the reason is bc this economy is much more global now and the valuations are lower now.. where many of the stocks back then had no earnings at all (nasdaq)
Thanks. You're right. I have increased the discount rate in all cases, some more than others. Right now, I am tossing the models for awhile and reading technical analysis of the financial markets by John Murphy. Trading is new to me.
dont short now boston. panic selling like a fool here is not profitable in the long run. you said yourself you are a newbie so you obviously have no 'read' or technical edge and are just emotional. look to short the next big rally instead, say in 3 months time? that would be a much better play you might get lucky but i wouldnt recommend it....
it's real simple as things slow down earnings will also come down. Perhaps not every company will be affected but the majority of company's will be cooling off and that's for sure. If a company's earnings aren't there then wall street and other analyst's exit and go elsewhere. Why pay 250K today when by waiting and accessing future prices you can buy it for a lot less. Subway's asking price should be related to it's income statements and if there net income goes down then the price comes down. However, your subway example is a little skewed by using a one week time frame to re negotiate the deal after seeing the market drop in just a weeks time. However, as everyone knows this is a macro problem and there is no quick fix. We are going to see things come way down in price as people quit spending like they used too.just wait and see how low things get. Of course that's excluding your bills <Grin> I'm referring to the widgets everyone loves to buy, the needless bullshit. Proceed with caution, 322170
First of all, you're never going to sell a business based on a DCF alone because you and your buyer are never going to agree about the assumptions (i.e. made up numbers) which largely determine the value. Even in normal market conditions you can find tons of companies that don't trade anywhere near their DCF-implied equity value. Second, as some have mentioned, the inputs to your DCF might well have been changed by the market events of the past week (i.e. cost of capital, growth expectations). Your anecdote is thus a poor justification for going long. Why don't you just simply say you feel the market has overreacted?
I like this thread, more examples of why most traders fail, the psychological need to reverse the trend. It is much better to sit and wait. Was it a temporary bottom, yes, ok buy. Was it not, great, short. Once in a while you might get lucky call a top or bottom, until you think you can do so consistently and then you cry. Learn to trade.
Well said... Hey Sky, The point is - NO ONE knows what these company's have on their books. It's all speculation at this point. Think about it... Bear, Lehman etc.... when you are leveraged 30:1 and blow up, you end up taking a lot more than yourself down. Everyone you touch now has cancer... and is sick.
What if the prospective buyer read in the paper on Monday or Tuesday that the GM plant next to the restaurant was considering laying off 4,000 employees, and the employees at the nearby Boeing plant were striking. What effect would that have on the market price of the restaurant?
There's an old saying that would be good for you to remember. "The market can remain irrational longer than you can remain solvent."