by Travis Johnson, Stock Gumshoe | August 24, 2015 10:53 am
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Travis: Is this real stock youre testing?
Yes.
I get a feeling the real bottom is a ways off, I think the stock market is going to decline for a quite a while. Seems like no matter what the Fed decides on rates in September will have a good chance of turning out as bad news regardless, so probably no help there. Fasten your seat belts!
The Fed will not raise rates. They will continue to buy securities to prop up the markets. When the Wall St. billionaires get impatient, as they have been waiting patiently to unwind their highly leverage positions from 8 years ago, it will cause a free fall that even the Fed will not be able to stop. Watch the market after 3 p.m.
I have kept my AAPL – both stock and faith! Picked up some more at $95.17 this morning on a lowball order I put in last night. Lucked out on this one. I got stopped out on some others, so not feeling too smug.
That would be my inclination, too — Apple is cheap again, though there is, of course, a nontrivial chance that the upcoming iPhone cycle will be less good than the current one. At the current valuation, AAPL shouldn’t require significant earnings growth… but the market still seems to insist that growth expectations be high for Apple, despite the fact that the forward ex-cash PE is now below 10 again. Without any real traction for Apple Pay yet, and with faltering iPad sales, the risk is really mostly that much of the company still rides on the annual iPhone upgrade cycle… still working great, but maybe not forever. I would have bought, not sold, given my druthers, this testing of stop losses is personally grating but will hopefully give me some valuable insight into myself over time (and a better idea of whether I’m better off using stop losses in the future).
…but wasn’t the stop loss ‘testing’ and subsequent stops a good idea at the time the stop order(s) were placed?
I don’t know. That’s why I’m testing them. It was a reasonable idea, and there’s academic and back-testing to support it, but whether it works for me or not over time, I’ll find out as this goes on. Just because it’s a reasonable or good idea doesn’t make it easy to implement, which is why I gnash my teeth at it even as I know it’s worth trying.
The Shiller P/E index is currently over 24 for the S&P 500. The historical mean is 16.6. Previous peaks occurred in 1929, 2000, 2007. We all know what happened after that. A reversion to the mean would require a roughly 30% drop in the S&P 500 from current levels.
How about a reversion to the other side of the mean ?
Travis. Some thoughts from 10th Man a free Mauldin publication
The Magic Kingdom
There are some analysts out there who look at DIS as a consumer products company because of the theme parks. I kid you not. The theme parks are big business, but DIS is a media company that depends solely on selling its content and the value of its content.
Disney has benefited from the sports/TV bubble, the superhero movie bubble, the Pixar/animated movie bubble, but as we are now finding out, these are very fragile revenue streams. Look at that five-year chart. It is a sight to behold.
Disney also became the most consensus long in the world. You couldn’t be a growth manager and not hold 50,000 shares of DIS. It came with the mutual fund starter kit.
People are now beginning to question those assumptions.
Star Wars is expected to make a billion, maybe two at the box office. In fact, you can go look at Disney’s calendar of movies out to 2018, and it is superhero movie after superhero movie. They just made a movie out of Ant-Man. What’s next, The Tick?
My prediction: in three years, people will be very bored of superhero movies. Maybe sooner than that.
Disney is about to turn from the perfect storm of awesome into the perfect storm of poo, and it’s all because of cord-cutters and unbundling. TV is 50% of their revenue. If people one day have the ability to opt out of ESPN, their revenue stream will look very different indeed.
Revenge
I’d like to get my money back from that awful Time Warner Cable trade. The best way to do it is through shorting Disney. I’m waiting and watching. If it gets anywhere near previous highs, I think I am going to take a shot.
In the new media landscape, Disney is the biggest loser of all.
Thanks johnnyb, I think I saw that when it came out a couple days ago — Disney is absolutely a media company first, and media companies are hit-driven, but I think he underestimates just how valuable entertainment franchises are. Marvel was a bargain masterstroke acquisition by Disney, and I expect Star Wars will be as well (though not nearly as cheap as MVL was), the value of recurring characters that so consistently generate blockbuster film/product/television results is incredible. Folks like you or I who look at it and say, “meh, super heroes are old hat, that’s played out” are just extrapolating global trends from our personal preferences… not usually a successful mental exercise. The facts point out that these movies and characters are increasingly successful and popular, and predicting the end of that is like predicting when some other trend takes over, for the past five years every dip in Disney from a flop of a movie that led to a bad quarter has been a phenomenal buying opportunity. Harry Potters don’t come along all that often, and it might take something like that to shake Disney’s dominance of almost all of entertainment.
I definitely agree that DIS got too expensive, and was too loved — that’s why I’ve held off on buying it, it kept looking too expensive. And, frankly, it’s still not cheap at $100. But if we get more sliding in the markets…
To my chagrin I let my broker talk me out of buying additional APPL and googlL at approx 9:34 am this morn.
This doesn’t strike me as a “flash crash” that will be just done and forgotten, there’s too much fear of China’s slowdown and global currency “wars,” and we’re heading into the September/October period when pundits are able to talk about only two things, the new iPhone and the historical Autumn market crashes… things may well be bumpy for a while, you might get another chance.
Bear market ?
FWIW. Martin Armstrong ( http://www.armstrongeconomics.com/armstrong_economics_blog ) is betting this is a “FALSE move.” He is betting that we will see the low (for the year and this cycle) this week or so– ‘though Mr. Market will back and fill for several months (probably until October), He is expecting the Dow to pass 23000 on its way to 40000 over the next several years as the money from the rest of the world comes roaring back to (it just now left in a panic the last few days and weeks as the rest of the world got a little wary of) the $ and Wall Street as the “haven of last resort”. Martin has made enough good calls to be paid attention, and his scenario sounds just plausible.
Me, I don’t expect “the CRASH” until next year; I am looking for a 10 – 20% correction here, then a good recovery into early next year (so that all of the pundits figure the danger has passed and its time to back up the truck…) and THEN in the April time frame or the more usual August – October time frame, CRASH!