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« Economic Stimulus Plans and Progress | Main | The Stress Test »

January 17, 2008



As a Fisher Investments employee, I learn more about the stock market (and some common misperceptions) at


what is the reason why they hit r ring the gong?



Thanks! I heard the same bell on Apple.



Excellent work, as always, Jeff.

I thought I heard a bell as AAPL crossed under 128 a moment ago...





You're doing a great job with the blog. Keep up the good work.



Shrek -

As a regular reader, and one who has made many valuable comments, you know that I do not look at valuation as a reason to buy all stocks in all sectors.

I agree with you about financials, which I underweighted in client portfolios when this started.

I think that valuation is an indicator of long-term sentiment, and useful for someone doing asset allocation in an index fund.

It is not a guidepost to particular stocks or sectors. Our individual accounts were up 16% last year by following this approach.

In short -- I agree -- and thank you for reminding me to make this point more clearly. I really appreciate the efforts of you and others who point out my failures to emphasize the right aspects of key elements.



Ive always found the valuation argument the toughest to swallow the last couple of years. The market certainly was right not to give silly valuations for the banks and brokers.



You are accurately citing my viewpoint about models. I have also noted the many reasons causing fear and skepticism about stocks, beginning with the 2000 experience and continuing through the 2004 election. Both individuals and market pundits have been skeptical about the economy and profits for years. We now have a year with some losses, so we shall see how much forward earnings expectations decline.

Thanks for (yet another) thoughtful comment.


Mike C

"Earnings projections are open to dispute, and valuation may be ignored when sentiment is negative."

Jeff, I'd be interested to have you expand a bit on what you mean here, especially the part about valuation being ignored.

You once wrote a post about a good model being both descriptive and prescriptive which I thought was an excellent point. If a model doesn't capture the reality of what happens, then is it a good model?

I don't know what the S&P 500 will do over the next 6 months, but for the sake of the argument if we do end up down say 25 to 30% from the level 12 months prior, then what does that say about a model that said stocks were "undervalued" at the beginning of that 12 month time frame?

Was it that:

1. The market ignored valuation?
2. The valuation model used isn't a good one?
3. Maybe valuation doesn't matter over a 12 month time frame?

As an aside point, I wonder if too many of us are all operating from the same playbook, and thus have changed what works. Whether you believe a bear market has started or not, there seems to be a general consensus that we are due for a short-rebound from "oversold" levels. I've been operating from this premise, and looking for an opportunity to get more tactically long. I just wonder if the bounce hasn't happened because too many of use expect it? The old adage is the market will do whatever confuses the most participants.

These are certainly interesting times.

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