“Baby, I’m sorry ’cause it’s all I wanna know, I need a little more cheepnis please!”
As I sit writing this the S&P is about 10 points off of it’s all time high, which made me think of this Frank Zappa classic. I find it very difficult to be throwing money at this market when:
The country is in the early stages of a public impeachment inquiry.
Economic indicators have been declining for several straight quarters (if not years) worldwide.
We seem to be in some golden period in regards to inflation and interest rates that is unlikely to last.
Whatever else keeps me up at night, from climate change to rising authoritarianism to the continuing disaster that is the New York Knicks.
“In the short run the market is a voting machine, but in the long run, it is a weighing machine” – Benjamin Graham/Warren Buffett
So what is cheapness (or cheepnis) in a stock? The cannabis sector has been hammered this year with most companies losing over 70% of their market value, are they cheap now, and based on what metric? Is Amazon cheap at $1760/share because I expect it to be at $5000 a share in the next five years? Sure, if I am right. SoftBank founder Masa Son is getting hammered lately (somewhat justifiably) on his recent unicorns that have come to market. So is the stock (SFTBY) expensive at $19.50, or is it cheap because the breakup value of SoftBank even after the recent disasters might be close to double the current valuation as reflected in the share price?
In the near term it is very hard to have answers, that’s why it’s really hard to be a short term trader. It’s a lot better odds that over the long term markets will rise and good companies will reward your investment. That said, in an increasingly short news cycle being a long term shareholder is harder than it has ever been.
Also, (hat tip to Doug Kass, who is essential reading) value investing sucks.