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Discussion Starter #1
I've been wondering about the extent to which the recent rally may have been driven by a desire to get out of cash that yields nothing. Reportedly, there's a lot of money sitting on the sidelines.
The only thing I am absolutely, 100% certain about is that holding cash is a losing proposition, even with very modest inflation. The scary part is that there's considerable reason to believe that inflation will be more than modest in the coming years. Economically, nothing has really changed, yet equities have rallied around 25% in just four weeks.
 

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I've been wondering about the extent to which the recent rally may have been driven by a desire to get out of cash that yields nothing. Reportedly, there's a lot of money sitting on the sidelines.
The only thing I am absolutely, 100% certain about is that holding cash is a losing proposition, even with very modest inflation. The scary part is that there's considerable reason to believe that inflation will be more than modest in the coming years. Economically, nothing has really changed, yet equities have rallied around 25% in just four weeks.
I don't know anything about what will happen in the future. All my wife and I know is that some stocks were/are really cheap so we bought them.
 

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Economically, nothing has really changed, yet equities have rallied around 25% in just four weeks.
I don't know if the rally has any legs or if we will revisit the lows at some point later. But sharp rallies are not unusual within bear markets. I recall at least two other significant rallies within this bear market.
 

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I kind of "feel" this is real (Yes. I did buy in March although not exactly at the bottom), but my life (financial or otherwise) doesn't depend on my being right. :cool:
 

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Discussion Starter #5 (Edited)
I'm not so sure that stock prices are cheap. The only thing I've bought recently is gold and silver. (for the first time in my life)

Other than that, I'm watching closely for a chance to short the S&P and/or the Dow.

It kills me to sit in cash, which I know is slowly losing purchasing power.
 

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The only way an individual is going to know if a stock is cheap is to be able to interpret the financial statements behind each company. Otherwise an individual won't know a bargain even when it hits them in the face.

With regards to shorting: unfortunately the DOW at 14000 has most people thinking about 15000 and buying, and the DOW at 8000 has most people thinking about 6000 and selling; which is backwards.

At DOW 14000 my wife and I had cash and was buying very little. At 6500 we did a lot of buying.

We're doing the same thing we did when the DOW was a raging bull in the late 90s and a depressed bear in 2002. We made a million bucks back then and we plan to make at least the same this time around.

If you have a lot of cash you should be buying assets that are cheap.
 

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The only way an individual is going to know if a stock is cheap is to be able to interpret the financial statements behind each company. Otherwise an individual won't know a bargain even when it hits them in the face.

With regards to shorting: unfortunately the DOW at 14000 has most people thinking about 15000 and buying, and the DOW at 8000 has most people thinking about 6000 and selling; which is backwards.

At DOW 14000 my wife and I had cash and was buying very little. At 6500 we did a lot of buying.

We're doing the same thing we did when the DOW was a raging bull in the late 90s and a depressed bear in 2002. We made a million bucks back then and we plan to make at least the same this time around.

If you have a lot of cash you should be buying assets that are cheap.
Jim, perhaps you can start a new thread on tips for reading balance sheets to determine valuations?
 

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Discussion Starter #8
Rickson9, it would be much appreciated if you could recommend some of your favorite books/websites, for those of us who would like to learn more about fundamental analyses.

Life-to-date, I've always relied on fund managers for security selection.

I had the good fortune to stumble into the current situation with a large cash position. (80%)

So far, my only move has been a 10% allocation into gold and silver. I may soon increase this to 20%.
 

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Rickson9, it would be much appreciated if you could recommend some of your favorite books/websites, for those of us who would like to learn more about fundamental analyses.

Life-to-date, I've always relied on fund managers for security selection.

I had the good fortune to stumble into the current situation with a large cash position. (80%)

So far, my only move has been a 10% allocation into gold and silver. I may soon increase this to 20%.
The books that were useful to me include One Up On Wall Street by Peter Lynch, The Warren Buffett Way by Robert Hagstrom and The Interpretation of Financial Statements by Benjamin Graham. You can see a progression in the reading because when I started I was 14 and my comprehension was very poor (it's not great now, but it's a little better).

Those 3 books encompass most of what I use. Other books that I have read include Buffettology by Mary Buffett, Wall Street On Sale by Timothy Vick, Beating The Street by Peter Lynch, The Little Book That Beats The Market by Joel Greenblatt, etc. These books rehash the same ideas as the first 3 so if you use financial books as entertainment, they're good as well.

As far was financial web sites go, I visit the following:
finance.yahoo.com
my blog in my sig
and this forum

When I do research I use:
morningstar.com
form4oracle.com
hoovers.com

Also http://www.investopedia.com/articles/analyst/071502.asp is a good refresher. Generally the companies I pick don't have these problems but you never know in these times.

I was never very good at evaluating the direction of commodities. I have no opinion on gold and silver outside of the opinion that my wife and I don't invest in them because we don't understand them.
 

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Jim, perhaps you can start a new thread on tips for reading balance sheets to determine valuations?
That would be quite the project and unfortunately I would be very biased on the weight I assign to different values in the income and balance sheet statements.

There are far better books about reading financial statements than I could provide. I do my best in the annual letters in my sig/blog but that's a work in progress that will likely continue for many many years to come.
 

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Discussion Starter #11
Thanks for the recommendations.

I actually read Peter Lynch's "One Up On Wall Street" years ago. Maybe it's time for a re-visit.

I remember it as a well written, easy to read, and common sense approach to investing.
 
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