[RandomHero]

Originally Posted by mact3333

I have to laugh out loud abit...what you are saying is exactly what all the investing books say...let me ask you this, the fundamentals of MSFT have been great over the past decade and they have increased sales and profits yet the momo players left that stock a decade ago and havent come back...same with INTC and CSCO...so why havent those stock prices gone up to any significant degree over the past decade???
I don’t agree with some of your opinions, but I managed to refrain from “laughing out loud a bit.” There’s an old proverb that goes a little something like: “If a wise man has an argument with a fool, the fool only rages and laughs, and there is no quiet.”

Since you asked me, I bothered to explain each of the equities you mentioned.

MSFT-It’s a blue chip company. It’s past its growth stage and it’s a value/dividend company now. Microsoft has increased its dividend every year for the past decade. The dividend yield has increased more than 400% over that time period. The dividend itself has increased close to 1000%. It’s a AAA rated company with a price that’s currently up 300% from its 52-week low. In 2009 it was up 59.5%. Currently year to date, its return is beating the market more than 5% and it’s beating the technology industry by more than 10%. I wouldn’t be ashamed of those numbers in the least bit. As of March 31st it’s one of the top 7 dividend stock holdings held in the 15 3-year best total return large-cap mutual funds (risk adjusted).

Simply put- It’s one of the top dividend stocks held by the best mutual funds. I’d say the “big players” are definitely with me on this one.

INTC-Intel paid a 4.2% dividend last year. Its dividend yield has increased around 1300% in the past year. However, Intel has underperformed the market and its industry for the past 1yr,3yr,5yr,and 10yr periods. Its current market cap is roughly half what it was in 2003. Furthermore, its market cap has increased less than 5% over the past 5-years. Its long term debt has increased more than 1300% in the past 10 years and its debt/equity ratio is 1200% higher in that same period. Intel’s sales decreased from 2011-2012 and they have only increased their total sales by about 6% a year on average.

Simply put-I can see plenty of reasons why one shouldn’t own INTC. The “big players” left it for a reason.

CSCO-It’s lost 32% of its market cap over the past 10 years (a good bit to Oracle). Its long-term debt has increased 150% since 2006. Its debt/equity ratio has increased about 11-12%. It has underperformed the market 7 out of the past 10 years and underperformed its industry 4 out of the last 10 years (each time by at least 12%). It’s ROA reached its low point in 2011 and remains near its 2003 levels. There are certainly some positives, but it’s a bland company at this point.

Simply put- It’s not a terrible company to own, but there are certainly better opportunities out there. The “big players” see better opportunities like I do.

I will tell you why, stock price is only about supply and demand...and if you think your investments are not influenced by the futures market and FOREX you either dont understand this concept or are delusional...

I completely agree that stock prices are entirely about supply and demand. Economics in general is about supply and demand and the study of scarcity. I never once said prices were not influenced by those factors. However, what increases demand? To me, a solid company with solid fundamentals is generally going to be in high demand.
Investing is like poker. No one has a crystal ball and can predict the winners, but you do have the ability to control your odds. Fundamental Investing is like playing a pair of aces. You aren’t going to win every time, but statistically speaking, you will win in the long run.
Technical investing is like trying to read your opponent. You ultimately negate what you have in your hand and attempt to read the other person. You’re betting that the other person has a crappy hand and will fold. Your goal is to pick up the pot. The better you are at reading your opponent, the better you will do. There’s nothing wrong with this method, but you better be damn good at knowing when to bluff and when to fold.


And what you said about money velocity is true but this is only important when there IS excess money supply to begin with...this happens when money is created out of thin air by the Fed's...also happens when loans(i.e.-money) are created out of thin air by the banks...then velocity is important but you can’t have velocity without supply...in a fiat society, MONEY=DEBT!!!!!

Not necessarily true. Even if the money supply remains the same, money can still exchange hands and prices can fluctuate. The strongest companies will ultimately survive and the weakest companies will fail. Look at the Big 3 car companies. General Motors and Chrysler both failed during the recession. Their fundamentals failed them. They weren’t prepared for a downturn and when people stopped buying cars, they were forced to take TARP money and then eventually declared bankruptcy. Ford on the other hand was the only one who survived. Their stock price got to an extreme low point, but you can’t ignore the fact that they were the only one of the three who survived.
The point is: Some inflation is a good thing. It promotes spending and growth because it helps increase the velocity of money. If I know that my money is going to be worth less in a year, I have more of a tendency to spend it now. In addition, if I get a slight raise, I might be tempted to go spend money on something I normally wouldn’t buy. I may not have money to buy a $5000 Rolex now, but if I think it’s going to cost $10,000 in a few years, I’ll be more tempted to buy it.
Without inflation there will still be some velocity of money. However, people will be more tempted to save. If I know that that same Rolex is still going to be $5000 in a few years, I’ll probably just save my money now and buy when it makes sense to. On the other hand, if there is no inflation, I’m still going to have to pay my bills, buy groceries, and pay my rent. I still have to spend money on certain things, but I may not spend money on discretionary goods.


Keep investing with fundamentals if thats your thing, but dont kid yourself, the reason why it works over the long run is because the Fed's keep expanding the money supply(helps real estate, equities, gold, oil, even your precious watches and pens) and inflation is created...dont believe me, plot of the value of the US Dollar since the fed Reserve Act was enacted in 1913 and plot of the stock mkt(inversely proportional)...value of dollar has gone down by 98% since then.

As I said, a small bit of inflation promotes spending, growth, and the velocity of money. I don’t disagree with your statement about the valuation of the dollar. That’s another reason why gold is considered a hedge for inflation. The US dollar is arguably closest thing to a central global currency, but gold is better medium of exchange. The FED could technically print as much money as they wanted and the value of the dollar would decrease. However, you can’t make more gold.
Once again, scarcity is what drives markets. If you take away mediums of exchange that have no intrinsic value (paper money, coins, and gold) eventually you’re forced to trade things for the things you need. At one point a cow might have been worth 20 bushels of corn. I don’t need a cow, but if I have 1000 bushels of corn, I can afford to buy that cow. If no one else has corn then I could try and trade 10 bushels of corn for a cow. Eventually, I could have everything I want and charge any price I want as long as I control everything people need to live. Those are called monopolies.
“Only the strong survive” and “The rich get richer and the poor get poorer” may be clichés, but there is a great deal of truth to them. Eventually the biggest and strongest companies will prevail and push out their competitors.

If the stock mkt was really dependent on earnings, then we would never see co's like TSLA and the 3D printing co's taking off like it is...speculation through stock supply and demand, that is what its about.
We saw a SHORT-TERM appreciation of both of those companies. Will they be able to sustain their prices? Time will tell. You’re talking about two companies that have seen rapid growth in a few months. In my previous post I agreed with your point on this matter. Technical analysis is best IN THE SHORT TERM. Fundamental Analysis will prove whether or not those companies can sustain that growth.
Let me ask you a few questions: Why do stock prices generally fluctuate immediately after a company posts its quarterly earnings? What would happen if Tesla suddenly declared bankruptcy tomorrow? Why did Apple’s stock price eventually correct itself?
Fundamentals drive prices in the long run. Technicals drive prices in the short run. Tesla and DDD are hot right now and everyone wants in. Eventually, there is going to be a price point where they run out of steam and you’ll see a big sell off. That’s when the price will correct itself and move to its fair market value.

I bolded my answers again. You're welcome to think I'm a fool. It won't offend me I promise. However, I challenge you to respond objectively rather than subjectively next time. I can tell you are an intelligent person which is why I'm attempting to have a sophisticated conversation with you. If I thought you were a moron, it wouldn't be worth my time. I enjoy talking about this sort of thing, and I am the first to admit that I don't know everything on the matter. However, I'm inclined to believe that I know more than most and I think my opinions are very valid and I always do my best to support them with examples or facts.