It’s easy to grin when your ships comes in and you have the stock market beat…but a man worthwhile is a man that can smile, when his shorts are too tight in the seat..
Ted Knight, Caddy shack
I miss Ted Knight. I know this quote by heart and I learned it before I cared about stocks and markets. I just loved Caddyshack.
The past few weeks have seen a new wave of ‘bubble’ talk. Mark Cuban got it started. I did not read it.
A NYC finance professor just posted a Mark Cuban takedown. I did not read it, but here it is. It’s probably loaded with data.
The professor is using the same fancy data he used to say Facebook was fairly valued at $38/share. He is only off so far by $138 billion. Maybe he should teach at Devry?
I try to live by this saying in the markets….Best tell me what you ARE doing than what I SHOULD do. Price and bubble predictions are useless.
Right now, the animal sprits have been raging in some areas of technology and especially biotech. The same biotechs that our FED chairman #Yellen said were overvalued 47 percent ago.
My problem with biotechs (not so much the biotech index like $IBB) has always been my lack of understanding of the metrics. Take a look at this statistic:
56 of the 89 (63%) stocks in the Nasdaq Biotech Index with market caps of more than $1 billion have no earnings. $IBB
— Bespoke (@bespokeinvest) March 20, 2015
Winning biotechs do have cash flow, so they are not the same say as Gold or other commodities, but the boom is very subjective and highly tied to emotion. I struggle trading emotion other than at extremes.
Nobody knows when the boom will end, but as ted Knight says…’It is easy to grin…
In a completely unrelated matter, Howard, how’s the island home? I remember you went for broke when it became available. Has it measured up? I would assume so, but one never knows unless one asks….
So much for that ‘obvious’ Facebook bubble at $38. These bubbleheads are worse than broken clocks in that the are never right, or at least much less than twice a day.In regard to Mark Cuban. I don’t even bother wasting my time entertaining that bubble mysticism. The tape matters. Reality matters. People, funds, institutions want ‘in’ on Facebook, snapchat, uber, Apple etc. As you say ride the trend.
You said…Trend, find them, ride them and get off …
I would add..Even when prices outpaced valuation.
Can’t short it unless you like stepping in front of freight trains.
In defense of Professor Damodaran, FB at the time was not worth what it’s worth now. The company has ADDED value since the IPO, which should surprise no one. There was a lot of uncertainty at the IPO, and it was clarified over time.
“Best tell me what you ARE doing than what I SHOULD do. Price and bubble predictions are useless.”
Facebook with a P/E of about 62 (yielding 1.6% return), it’s fairly valued compared to investing in 5 year treasury bonds yielding 1.6%. But if/when investors no longer consider the US government a good investment, then it won’t be fairly valued. Considering that US debt as a % of GDP is now over 100% things are getting a bit scary.
Also consider, per Kotlikoff at the NYT: http://www.nytimes.com/2014/08/01/opinion/laurence-kotlikoff-on-fiscal-gap-accounting.html?_r=0
“I calculate that the “fiscal gap” — a yardstick of total government indebtedness that I’ve worked on with the economists Alan J. Auerbach and Jagadeesh Gokhale — was $210 trillion last year, up from $205 trillion the previous year. Thus $5 trillion was the true deficit.” Kotlikoff also points out that grandma’s Social Security payments aren’t included in the official debt, while her income from treasury bonds is. This explains the accounting fraud being perpetrated by the US government.
I’d rather own something of value or something that produces value, rather than a promise from government.