The easy one asks how I access CNBC Asia and Europe in Arizona. CNBC has created a channel called CNBC World that runs CNBC Asia from 3pm mountain time to 9pm. CNBC Europe runs off and on from 10pm mountain time until noon:30 the next day. I know the channel is available on Directv and Dish Network and it is advertised as a digital cable channel buy I don't know if any cable systems offer it.
The other comment posted was from someone named Luca who had this to say;
I disagree with you about the role of individual stocks in average investors' portfolios (remember, Ben Stein's article is about basic advice). There's nothing basic about investing in individual stocks. Without a decent understanding of markets, sectors, the economy and company financials (at the very least), buying a stock is a pure bet. And if BUD is such a no-brainer, why don't you own it? ;-)
I like these types of comments. Luca challenges the thought process behind the post which has the potential to be constructive.
To Luca's first point, one of the primary focuses of the blogs I am familiar with is to help create a decent understanding of markets, sectors, the economy and company financials. For people that do not have the time to, in any way, do it for themselves there are products and people to help. Based on the public comments and private email I receive, I have to say that most blog readers have an interest in doing it themselves and learning more than they currently know. It would seem that if someone has time to read a blog like this one they are able to prioritize their time in such a way that they are making their own education a priority.
Lastly Luca asks, tongue in cheek, why I don't own Anheuser Busch if its such a no brainer. I don't know how many stocks there are right now that have been public since 1971 (the time frame cited) but I would imagine that about half of them have done better than the market and about half have lagged the market? Maybe its more skewed to outperform just as a function of longevity, but I haven't studied the numbers.
Would anyone call a stock with a track record of at least 34 years of beating the SPX a pure bet? Do other people really think picking any stock is pure alchemy? Luca's questions are absolutely the right ones to ask but I think Luca's conclusions sell too many people short.
Without any hesitation I advocate using several different investment tools, including individual stocks. In the accounts I manage that are large enough to be fully diversified no one stock is more than 3%. If one of the 3%'ers goes to zero overnight my clients won't be financially damaged. This goes a long way to mitigating the risk that concerns Luca. So I reiterate that for someone managing their own portfolio a few stocks, a few ETFs, a few CEFs and maybe a couple of other things will work. This is not an endorsement to take short cuts or to stop actively managing your portfolio.
Thanks for the great comments!
Lastly, the guest of note on Asian Squawk Box last night was Stephen Gollop. I've previously written about Mr. Gollop here and here. Mr. Gollop has been bearish on US equities for a long time. On this appearance he gave a new, for me anyway, nugget about it would take for him to get interested in US equities again. He said US P/E ratios average more than 20 and he'd like to see them at 11 or 12. He thinks we will get there through years of sideways trading. For Mr. Gollop to be correct the market would have to do something it has never done, trade sideways for years.
Market historians will note that the market did not get back to its pre-great depression high until 1941 and the Dow first touched 1000 in the late 1960's and didn't get back until November 18, 1980. In between was a lot of volatility not sideways trade, at least in the way I think of it.
How often does the P/E of the market drop by 40% anyway?
4 comments:
Roger, very thought-provoking as usual. To your second point, about Mr. Gollop's comments re: the markets "trading sideways" for a number of years, I think this is semantics. Without speaking for him, my view is that the markets will "trade sideways" for several years, and what I mean by that is exactly what you describe after the 1929 crash, and from mid 60s to the early 80s. Just as there were 15 years or so from the first close of Dow 1000 to the last close of Dow 1000, I think we may see the same for Dow 10000. (My guess for the last Dow close below 10000 is somewhere around 2010-2012).Of course, there was a lot of up and down from the mid 60s to the early 80s, but we ended up at the same index nuber (although, I'm sure, at a lower PE;>). Perhaps "trading up and down" is more accurate than "trading sideways."
But this fact actually makes your first point--trading individual stocks and ETFs becomes MORE important, as this is the way to grow your capital over the next few years--I believe those who just dollar cost average into the major indices will see little growth over the next 5-10 years.
OK, I used the term "bet" inappropriately (I am neither a gambler nor a native English speaker, and it shows!).
What I meant is that the lack of knowledge and understanding of the stock you are buying puts you in a position of winning or losing any portion of your investment by pure chance, as if you were betting on the flip of a coin.
I believe that the average Joe should know as much about investments and markets as he should know about medicine: enough to have a reasonably intelligent conversation with a professional, but not enough to perform surgery. If the "products and people to help" you mention are mutual funds and portfolio managers, we agree 100% and should chat about wildland firefighting instead (have you passed your pack test yet this year?).
Luca,
If you see this reply...
You know about the pack test? Are you on a crew somewhere? Our pack test is scheduled for April 30. It should be easier this year because we bought some of those weight vests. Last year I had a combo of rocks and bullets in my line pack, very uncomfortable. Also we are taking it at a lower elevation. I live at 7000 feet, we do the test around the fire house (6500 feet) but this year we are doing the test closer to 5500 feet.
I'd be curious to know where you fight fires. Thanks again.
Roger,
I volunteer with a fire department in Colorado, and we do it all - medical, structural and wildland. I live at 9,200 ft and the firehouse is at 8,500 ft, so we get 1.5 extra minutes for the test. I use the vest for training, but I find it somewhat challenging because some of the weight lays on the lungs, making it harder to breathe. For the test this year I will use a small hiking backpack with a disc weight from the gym. I like the disc because it stays flat against my back and therefore I do not have to lean forward too much to compensate (last year I used a case of water bottles, and it was rather suboptimal balance-wise). I don't use the line pack because it lays way too low on the hips.
Last year I did a lousy 43 minutes, I really hope to do better this year although I haven't trained much for it yet.
BTW, my email is luca9200 AT gmail.com, and my blog is luca9200.typepad.com.
Cheers!
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