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Is Today’s Market More Overvalued Than It Was At 2000 and 2007 Tops?

daily chart August 11 2014 8/11/2014 – An up day with the Dow Jones up 16 points (+0.10%) and the Nasdaq up +30 points (+0.70%).

The stock market continues to, more or less, behave as anticipated. So much so, that my subscribers know not only where this correction will bottom (hint….its not yet in), but also the exact date. Plus, what to expect from the resulting rally. Click here to learn more. 

It has been a while since we have talked about how overvalued the stock market is from the fundamental perspective alone. This article should get us going “Everything seems expensive”: Why today’s valuations are worse than in 1999

  • Median P/E today is 20 vs. 16 in January 2000
  • Median price-to-book today is 2.5 vs. 2.2 in 2000
  • Median price-to-revenue today is 1.8 vs. 1.4 in 2000

Yet, most of the analysts discussing the subject matter miss the big picture. Not only are today’s valuation levels just a little  bit higher, they are exponentially higher. This has to do with the fact that a lot of the earnings growth over the last few years have been driven by money printing, QE, low interest rates, etc….

If fact, if we are to account for such factors, today’s artificial P/E ratio is likely to be well over 40. When today’s earnings disappear, as they will in the upcoming recession, you will see the E in the P/E vanish and the ratio jump much higher. That is exactly what happened in 2008 when earnings vanished and the S&P P/E jumped from 18 to over 60. This will happen again as the next bear leg develops.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2014-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2014-2017 will start (to the day) and its internal composition, please CLICK HERE

(***Please Note: Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. August 8th, 2014 InvestWithAlex.com

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Is Today’s Market More Overvalued Than It Was At 2000 and 2007 Tops?  Google

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When You Should Trade In & Out Of Your Potential Tenbagger

Continuation from Friday…….One of the first things we have to realize in our attempt to anticipate and to time such large moves in the underlying stocks is the fact that the fundamental analysis will not be very useful.  We cannot rely on such an analysis due to a simple fact that the stock market or individual stock movements lead the fundamentals at least 95% of the time. In other words, by the time the actual numbers filter through onto financial statements or into press releases the corrections we are trying to identify are likely to be over.  Or nearly over.  The only fundamental metric that would be useful in our case is the general overvaluation of an underlying security.

For instance, if company’s stock price had appreciated so much over a relatively short period of time that it now sells above any reasonable valuation level, even if the future is otherwise bright, it is highly probable that the underlying stock price might correct fairly soon. Once we understand such fundamental shortcomings, it leaves us no choice but to concentrate on the technical and mathematical/timing side of the equation.

Our first 60% drop in Keurig’s stock price had occurred between 2001 and 2002. To be exact, the company’s stock price topped out in July of 2001 at around $2.90 a share and then proceeded to collapse into October of 2002 bottom of $1.00 a share. A 65% decline.  GMCR4

Once we look at the chart a number of things become immediately apparent.

  1. From the fundamental perspective alone , by the time 2001 top had arrived the company’s stock price had already zoomed up 1,100% from our 1999 proposed $0.25 entry point. Going parabolic on a number of occasions. In other words, while Keurig coffee systems were starting to get traction, there was no way for the fundamentals to keep up with a rise in the stock price. The stock was overpriced and overextended.
  2. An investor applying mathematical and timing work to the overall market would be aware that the overall stock market is going through its initial bear leg and that this bear leg was not scheduled to bottom out until October of 2002. Rendering 2001-2002 period as a high risk one.

Given the setup above, any investor in the GMCR stock should have shifted in a highly defensive mode in 2001 by watching the technical side of the stock extremely closely for any sign of a technical breakdown.  As a technical breakdown at this juncture would have likely yielded a substantial decline in the company’s stock price.

That is exactly what happened in August of 2001 when Keurig’s stock broke below its lower low at around $2.50 and continued to head lower.  At that point, any investor who was watching the stock should have A. Sold his holding and B. Gone short.  The overall probability of a significant stock decline at that juncture was too great not to do so. Particularly when the technical analysis was confirming the move.

To Be Continued Tomorrow……

Z30

When You Should Trade In & Out Of Your Potential Tenbagger Google

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Is This The Buying Opportunity Of A Lifetime

daily chart August 8 2014

8/8/2014 – A strong up day with the Dow Jones up 185 points (+1.13%) and the Nasdaq up 36 points (+0.83%). 

As you very well know, psychological make up is incredibly important when it comes to making money in the market. If you would be interested in learning what the prevailing view on the Wall Street is today, watch the video below.

While Mr.Smith makes a number of ridiculous statements, I will address only two. At appears that he believes that the economy drives the stock market. The reality is quite different. It is the stock market that drives the economy. And you don’t have to go further than 2007-2009 to see this principal at work. The economy was booming as the stock market topped out on October 11th, 2007 and then proceeded to collapse. Even Bernanke was talking about how hot the economy was until the second quarter of 2008. And while the economic numbers continued to collapse well into 2010, the stock market was surging higher since the March of 2009. So, who is leading whom Mr. Smith?

Second, bull markets do not die of old age. Sure, that would be great if we were in a bull market. This is the mistake that 99.99% of all investors are unaware of. We are not in a bull market. We are still in a secular bear market that started in 2000 and that will end in 2017. The 2007-2009 correction was not a bottom. Rather, it was a mid cycle correction within a secular bear market. Same as 1972-1974, 1941-1942 and 1907-1908 corrections. In other words, another big decline is still in front of us.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2014-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2014-2017 will start (to the day) and its internal composition, please CLICK HERE

(***Please Note: Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. August 8th, 2014 InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Is This The Buying Opportunity Of A Lifetime  Google

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Tenbagger Trading Rules

Tenbagger Trading Rules
Maximizing Returns

Book Continuation From Yesterday…….While analyzing individual stocks in previous chapters we have looked at a number of variables that would allows us to first identify potential Tenbaggers, analyze their potential and then possibly take a position.  Yet, as we study the companies above we soon come to a realization that it is just as important to know when to get out or trade out of such stocks as it is when to initiate an original position. Doing so at the right time would not only prevent unnecessary losses, but in many cases it would allow us to double or triple the overall return on an underlying position (capital gains taxes are not considered in this analysis).

For instance, while Apple’s stock price had appreciated 3,700% over the last 11 years, the stock itself went through three significant corrections during the same period of time. A 60% drop in 2005, another 60% drop during the financial crisis of 2007-2009 and a 45% drop in 2012-2013. What’s more, another large drop is just around the corner.

If we were able to …..

A. Rotate in and out of these stocks at the right time and
B. Even go short

….our returns for such underlying Tenbaggers would skyrocket. For example, if we were able to avoid the three massive corrections in Apple’s stock price, our 3,700% return would quickly turn into a 16,220% return (approximately). A 162 bagger over the same period of time. Not bad. Yet, if we were fortunate enough not only to avoid the collapses but to short into them, we would be able to push our returns even higher. In the case of Apple our returns would skyrocket from 3,700% to 27,100%. Do this a few times and begin to realize just how important this approach is.

That is why it becomes incredibly important to lay out the necessary framework of getting in and out of our Tenbaggers at the right time. In this chapter we will look at each individual Tenbagger we have decided to invest in (Keurig, Apple and Chipotle) in order to ascertain at what points we should have gotten out and at what points we should have re-established our positions in the underlying securities. We will also determine if it would have made sense to go short at certain times to boost our overall returns. Finally, we will establish a clear set of trading rules that we should be able to apply to our future Tenbaggers.

Trading In and Out of Keurig Green Mountain (GMCR)

GMCR

To summarize, Keurig Green Mountain’s stock price had appreciated 49,600% between 1999 and today. Yet, if we were fortunate enough to take a long position in the late 1999 or early 2000 it would not have been an easy ride up. That would be due to a fact that Keurig suffered through a number of serious corrections during the same holding period.  To be exact, the stock had suffered through a 60% drop between 2001 and 2002, 50% drop in 2008 and a gut wrenching 84% collapse between 2011 and 2012.

To Be Continued On Monday……

Z31

Tenbagger Trading Rules  Google

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When Will This Correction End?

daily chart August 7 2014

8/7/2014 – Another down day with the Dow Jones down 75 points (-0.46%) and the Nasdaq down 20 points (-0.46%). 

The stock market continues to behave as anticipated. So much so, that my subscribers know not only where this correction will bottom, but also the exact date. Plus, what to expect from the resulting rally. Click here to learn more. 

If you follow mainstream financial media you are likely to believe that the most recent sell off has been caused by geopolitical tensions throughout the world. In fact, according to the same people once this 5-10% correction is over, it will present patient long-term investors with a “Buying Opportunity Of A Lifetime”…..as always. Perhaps. 

Yet, as I have suggested here so many times before, the stock market doesn’t care about any of that. The market simply traces out its exact mathematical structure in multidimensional space. Its own DNA sequence. Something I describe in great detail in my book “Timed Value”. For instance, today’s 5 year cycle (off 2009 March 6th bottom) has now lasted as long as only ONE other 5 year cycle since the stock market started trading on May 21st, 1790. And if we are to compare them we would know exactly what happens next.

If you would be interested in learning what happens next and/or when a bear market of 2014-2017 will start (to the day), please CLICK HERE

(***Please Note: Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. August 7th, 2014 InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

When Will This Correction End?  Google

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Why Some Investors Zig While Most Others Zag

daily chart August 6 2014

8/6/2014 – A slight up day with the Dow Jones up 13 points (+0.08%) and the Nasdaq up 2 points (+0.05%). 

The stock market continues to behave as anticipated. So much so, that my subscribers know not only where this correction will bottom, but also the exact date. Plus, what to expect from the resulting rally. Click here to learn more. 

I often get asked why I am so bearish or negative on today’s financial markets. Such people miss the entire point. I am neither a bull nor a bear. In fact, I could care less if the stock market is about to surge higher or collapse into a 2009 bottom. What is important is my mathematical and timing work. The same work that have made me incredibly excited and bullish in the first week of March 2009. Watching the Dow slam right into my target bottom on March 6th was a thing of beauty.

Which brings me to the point I am trying to make. There is a small subset of investors who are inversely predispositioned to the market. As opposed to other investors, it is in their nature to question things that do not make sense and to go against the grain when their research proves conclusive. Typically, such investors are able to outperform the market by a large margin.

For instance: India central bank chief warns of another market crash

India’s central bank governor, renowned for forecasting the 2008 financial meltdown, has warned that the world economy faces risk of another market crash as asset prices surge.

What is it that he sees that most other market participants in today’s environment miss? May it be extreme overvaluation levels, FED tightening, flattening yield curve, multiple divergences, speculative fever, etc……What is it? Most likely all of the above. Once again, if you are able to step away from the fire it is incredibly easy to see that the overall stock market is in a massive bubble that must unwind. One way or another.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2014-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2014-2017 will start (to the day) and its internal composition, please CLICK HERE

(***Please Note: Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. August 6th, 2014 InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Why Some Investors Zig While Most Others Zag  Google

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No Love From Bally’s

BYI2

Continuation from yesterday……TECHNICAL ANALYSIS

Since the fundamental analysis has failed to yield any sort of a buy signal for Bally’s stock in 1999-2000 we must now concentrate on the technical side of the equation.

As the chart above shows, between 1993 and 2000 the company’s stock collapsed from $34 a share to less than $0.50 a share.  What’s more, this substantial down move had occurred during one of the strongest bull markets in history.

Unfortunately, outside of dropping 99%, Bally’s stock gave us very few clear technical clues that it would either top out in 1993 or bottom out in 2000. Outside of a clearly defined downtrend between October of 1993 and 1999-2000, we have very little to go by. As was mentioned earlier, by 2000 Bally’s fundamental and stock price performance has gotten so bad that it received a number of delisting warnings/notices from the Nasdaq. In other words, any analyst looking at this stock and the company’s fundamental performance at the time would have assumed that the Bally’s stock would be delisted. Ending up in the pits of OTC trading.

Yet, despite the setbacks Bally’s stock price bottomed at $0.42 in May of 2000 and then went on to appreciate to $34 by April of 2004. An 8,000% gain in less than 4 years.  Unfortunately, the stock itself gave us very few technical clues that it was about to stage a massive multiyear rally. In fact, it wasn’t until March of 2001 that we would have gotten our first real technical confirmation that the Bally’s stock price might be going through something more than a simple bounce. By that time the stock was already selling at $3 a share.  While an entry at that point would have still resulted in a 10-20 bag run over a 5-13 year period of time, such performance would have been far below our anticipated threshold.

In conclusion, technical analysis alone would have failed in giving us a clear buy signal anywhere close to our anticipated entry point of $0.50-1.00 a share in the second half of 2000. There were NO clear technical signs that Bally’s stock price was about to stage an 8,000% rally or a rally of any kind. Perhaps we will have better luck with our timing and mathematical analysis.

TIMING & MATHEMATICAL ANALYSIS: 

To Be Continued Tomorrow……

Z30

No Love From Bally’s Google

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Why Corporate CEOs Are The Dumbest Investors Out There

daily chart August 5 2014

8/5/2014 – A down day with the Dow Jones down 141 points (-0.85%) and the Nasdaq down 31 points (-0.71%). 

The stock market continues to behave as anticipated. So much so, that my subscribers know not only where this correction will bottom, but also the exact date. Plus, what to expect from the resulting rally. Click here to learn more. 

Now, the amount of stupidity out there remains off the charts. In fact, I am still trying to figure out if that level was higher at 2000/2007 tops or not. Case and point……

Case #1: Apple Buybacks Pay Most Ever as CEOs Spend $211 Billion

S&P 500 constituents have spent $211 billion on their own stock this year amid concern the five-year bull market is prone to selloffs such as last week’s 2.7 percent retreat.

Say what? Let me get this straight. So, CEOs are buying back their stocks at extreme valuation levels and as fast as they could to avert a collapse? While the last part might not be entirely accurate, they are, indeed, buying at the top. As they always do. To be honest, they would probably make a lot more money buying long term put options against their own stocks instead wasting billions on pointless buybacks.

Case #2: Tesla to double in the next year? Trader says yes

Why will Tesla double? Well, that’s a stupid question according to this guy. Obviously because it is showing strength in the face of the most recent decline. When highly speculative stocks like Tesla do that (selling at forward P/E of 75 and at 12 times sales), they tend to double when the market recovers. Come on, even retarded apes know that.

On a more serious note, if this doesn’t scream out “market bubble”, I don’t know what will. The first step is to understand that most market participants are, once again, playing a game of musical chairs. Just as they did at 2000 and 2007 tops (and many others). The real question is……will you have a chair when the music stops playing?

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2014-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2014-2017 will start (to the day) and its internal composition, please CLICK HERE

(***Please Note: Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. August 4th, 2014 InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Why Corporate CEOs Are The Dumbest Investors Out There Google

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What A Real Gamble Looks Like

BYI

Continuation from yesterday……As we begin to analyze the company in the 1990’s we immediately realize just how out of shape and dysfunctional the company was at the time. On many different levels.  For instance, the company was involved in so many different businesses or lines of business that it would have been virtually impossible for anyone to truly understand their operations.  From developing slot machines and gaming systems to operating river boat casinos, from international partnerships to running their own slot machine route operations. And the list goes on.  In short, it would have been impossible to fully comprehend, let alone analyze the company from the fundamental perspective alone.

Part of the problem stemmed from the company’s mismanagement in the past and number of acquisitions/takeovers the company went through in the 1990’s. So much so that by 2000 Bally’s stock was on the brink of being delisted from Nasdaq. Hence the low price. Yet, by the end of 2002 the company was earning record revenues and profits and was even able to move from the Nasdaq to the New York Stock Exchange.

What had caused such an improvement in operations?

A turnaround of sorts. The company began to consolidate its business lines and divest non-core assets. Selling a number of properties and businesses in the process, raising additional cash and paying off debt. Further, the company refocused on technology and slot machine, introducing a number of popular products throughout 2000’s. Today, Bally Technologies has a much simpler structure and business. Deriving all of their revenue from just three lines of business, gaming equipment (34%), gaming operations (41%) and systems (25%).

If we analyze the company during the 1999-2000 period, unfortunately, we would have been unable  to predict that the company would A. Begin its turnaround efforts  B. Start consolidating and selling off assets  and C. Be successful.  In fact, after pouring over company’s records and financial statements during that time I have yet to find one management discussion alluding to the fact the company will attempt a turnaround.

In other words, it would have been impossible to predict the company’s turnaround from the fundamental perspective alone for the following reasons.

  • The company’s structure was too complicated.
  • Financial mismanagement and a heavy debt load
  • The company was on the verge of a financial collapse.
  • No discussion of any turnaround attempt by the company’s management.
  • No discussion of consolidation and asset divestiture.

The question becomes, would investors be able to forecast such changes on their own?

Absolutely NOT.

The fundamental developments above could not have been anticipated nor predicted. Particularly when the management of the company did not talk about them in advance.  And while we could have assumed the company would have instituted additional turnaround steps, we would have no way of knowing if they would actually work and to what an extent they would go. Forcing us to make an investment decision on hope alone. An unacceptable way to approach any sort of an investment decision.  Perhaps technical analysis can offer us a better answer.

To Be Continued Tomorrow……

Z31

What A Real Gamble Looks Like  Google

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Why Is Warren Buffett Sitting On $50 Billion In Cash? I’ll Tell You Why

daily chart August 4 2014

8/4/2014 – An up day with the Dow Jones up 76 point (+0.46%) and the Nasdaq up 31 points (+0.72%).

The stock market continues to behave exactly as anticipated or as per our exact internal forecasts.  And while most market participants are in love with this market and see the recent sell off as yet another buying opportunity, at least Warren Buffett does not share in their optimism.

Buffett Waits on Fat Pitch as Cash Hoard Tops $50 Billion

I know, I know……only if all of us could have the same problem. Yet, it is a serious matter. Mr. Buffett is sitting on so much cash because it is impossible to allocate this capital in an appropriate fashion. Why? Because everything…and I mean everything has been driven up into a bubble valuation territory. Outside of a few special situation and a few potential turnaround stories, there is nothing to invest in. Particularly, if you are looking for value. In other words, the overall market is in a massive bubble and it will pop. As it always does. I can only imagine that Mr. Buffett will be buying hand over fist when there is blood in the streets. As he always does.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2014-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2014-2017 will start (to the day) and its internal composition, please CLICK HERE

(***Please Note: Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. August 4th, 2014 InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Why Is Warren Buffett Sitting On $50 Billion In Cash? I’ll Tell You Why  Google