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To: westpacific who wrote (3411)5/4/2001 10:48:10 AM
From: pezz
   of 74259
 
It's a market of stocks ........some will do better than others. Diversification is for folks that want to be onna par with the market. I expect to beat the averages soundly. Besides Buffet is talking about large caps and furthermore trying to predict 10 years out is crazy IMO.

I suppose if you do get 12.5% return that will satisfy you but a guarantied return seems pretty boring to me.....I would play the "great Game" for match sticks if necessary....... I guess my ego needs the stimulation that the clash of risk vs reward brings.

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To: Ilaine who wrote (3417)5/4/2001 11:10:53 AM
From: jim black
   of 74259
 
Blue, good morning...a couple of points shamelessly borrowed from "Devil Take the Hindmost" which I
ardently recommend for anyone on this thread who may not have read it.
<<Fair value is whatever a willing buyer will pay to a willing seller>> Much discussion directly stemming from the book chapter regarding "Tulipomania"...Semper Augustus bulbs sold for 1200 florins, the price of a two-story
townhouse at the time. Your quote comes right out of three bubbles in the book, including tulips and John Law. The very words were used at the respective times. It is a notion that has been around a long time and is right out of Milton Friedman's thesis that was the foundation of much modern economic theory. I cannot expound at length because I was a math major, not an economist. My contention is that ultimately stocks might best be viewed as worthy of buying
only in light of 1) greater fool theory, to wit, finding someone else who will buy your CSCO shares at 120
if you paid 80/sh for 'em OR 2) and more reasonable in my mind, what is the value of the dividends AND
price appreciaton in normal times, ie not bubbleland?...most of the stocks I listed yesterday on the DOW,
those like BA, UTX, JNJ, HWP, AXP, WMT, HD, INTC, C, T, MSFT (zero dividends) ALL with divdidends
less than 1.7% qualify as definitely overvalued in my book. I must admit I have made big money in this
market, most notably with QCOM, but I step across the line in the sand drawn by Buffett. I think this market is absolute madness.
In reference to derivatives, like nearly anything financial. I am in complete agreement with you that they
are not inherently "evil" but like so much in that book I reference that can not be quoted at great length, there
is great danger to the ENTIRE SYSTEM, e.g., Greenspan's bailing of LTCM. LTCM had less than 50 billion
in assetts but they were so entangled with derivatives (margins, derivatives on derivatives,etc.) that the failure
of LTCM threatened to bring down the world financial system. I think there is more danger there than most
of us really have a clue, and so does the author of the book.
good discussion this am, Thread...thanks
jim black

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To: pezz who wrote (3426)5/4/2001 11:18:58 AM
From: Dolinar Janko
   of 74259
 
>>Besides Buffet is talking about large caps and furthermore trying to predict 10 years out is crazy IMO.<<
Same opinion. I would never, except in my dreams, compare with him. And besides, his bantering about reasonable margin of safety is so ... boring.

dj

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To: pezz who wrote (3426)5/4/2001 11:27:24 AM
From: jim black
   of 74259
 
PEZZ!!!!!!! Brilliant disclosure and quite insightful, helpful, honest and refreshing...you have nailed a point
of debate on the head, one not always disclosed in this thread but implicit to much of our discussion
here. You ARE in it for the game of it and some of us here, I daresay, are there to play with you. Others
among whom I count myself are to the point we have made our chips at our seat at the table and don't want to lose
them. Like many who have said so here on this thread, I side now with those of us who merely want to
preserve capital as much as make it. That point I believe is at the heart of some issues which seem to be a bone of contention from time to time. Though probably none of us here is old enough to actually remember
1929-32 (not even me) some of us like Jay Chen have lived through scary times in their lives when they have lost everything but the opportunity to continue breathing. Thanks for your open disclosure of a what I view as a very respectable position...a person who has money to play with and who is willing to play with it in dangerous
times.
jim black

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To: jim black who wrote (3427)5/4/2001 11:30:32 AM
From: Dolinar Janko
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Hi JB: May I suggest a very sound reading in between the chapters?

prudentbear.com

Re derivatives - as a physicist (hey, this is slowly becoming a Leon's club for Gods sake...) I had a full share of theory and practice on derivatives. Here's one:

dP/dt = Rate * P

This is ...(Multiple answers allowed):

a) time derivative of P is something times P itself... Huh?
b) Gimme a break, that's a simple linear, first-order diff. equation - solution P(t) = P(t=0) * (1+ exp(rate * t))
c) this how the interest works on my capital
d) this is how the bomb works (which bomb?...)

dj

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To: Dolinar Janko who wrote (3430)5/4/2001 11:48:58 AM
From: The Jack of Hearts
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I've been wondering if I'd ever use all those calculus and differential equation courses in the real world :0) eom

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To: jim black who wrote (3427)5/4/2001 12:16:25 PM
From: Gary H
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The "Devil Take the Hindmost" is on my list now. It sounds somewhat like "A Brief History of Financial Euphoria" by John Kenneth Galbrath. Interesting read. All this has me in the mind to re-read "The Great Reckoning" by Davidson & Ress-Mogg.

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To: The Jack of Hearts who wrote (3419)5/4/2001 12:43:45 PM
From: westpacific
   of 74259
 
This whole rally is a fed liquidity rally, including this AM. The question is how long they can sustain it in the face of more and more negative news.

And now Bush comes out and revises GDP, basically the FED lied to you.

More later.

West

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To: tradermike_1999 who wrote (3418)5/4/2001 12:47:01 PM
From: westpacific
   of 74259
 
Mike - this postindustrial economy is what is leading to the job losses. And it will continue. Only manufacturing can offer safe, secure and long term jobs.

What people fail to relize is this great experiment of globalization is going to kill the job market here in the good old US.

More to come.

West

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To: The Jack of Hearts who wrote (3431)5/4/2001 1:21:09 PM
From: Dolinar Janko
   of 74259
 
I guess, knowing the importance of the real interest rate is good enough "in the real world". Whatever the derivatives say.

dj

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