You think but you do not know so it is more of an educated guess that you take.

Just to throw in another point of view for you to probably disagree:

Equity market movements are over 95% predictable so to me there is no reason to take an educated guess. Successful portfolios are not build on what you think but on what you know.

I enjoyed the discussion Arohan and value your point of view.

Take care.

Apollo’s last blog post..IMF in the news

Another way to say this is an undervalued stock for me is the one that is currently attractively priced based on what I think its real price should be.

I agree that S&P 500 is a low benchmark and this was mentioned just as an illustration for the valuations today. I have no benchmark. I am not answerable to anyone except myself. My only goal is to maximize my profits. And I do not know if the message comes through as clearly in my blog postings as I would like, but I would be the first to step forward and say that EMH is bunk.

Good luck to you as well!

Compare it to the following:

Lets assume that you want to give high jump a try. Now you set the bar at 6 inches which is ridiculously low. All you have to do is fall an trip and you may cross that bar. Now you jump 2 feet (which is still very very low) and applaud yourself as you extremely outperformed your expectations.

Judging a portfolio’s performance based on any benchmark is equal to bury expectations in the ground. There are so many opportunities out there but there have always been and there will always be regardless of what happens (election, crisis, meltdowns, etc…). Most companies are still overvalued at current prices. The performance of equity markets should have no impact at all on any (sophisticated) portfolio as opportunities are created on both sides of the spectrum…it does not matter if there is a bull or bear market…long or short position.

I hope your portfolio yields the desired results.

Apollo’s last blog post..Bank of Canada tinkers with rates…

The problem however is two fold:
a. Picking the stocks that will give the biggest bang for the buck, and
b. Finding capital to deploy

However, it is likely and probable that the valuations will remain attractive for some time to come so there is really no hurry. Besides, if Obama wins the presidency than I may want to tilt my investments towards more international names

The U.S. has become extremely non-competitive on a global scale and only Japan has a higher corporate tax rate and they don’t exactly have a healthy economy but have suffered after they bailed out their financial system in the late ’90s.

Their is a right way to do it and a wrong way…you just need to look at the big picture rather than focus on a small piece of the puzzle.

To increase taxes has the opposite effect just like Arohan stated so you may get what you wish for but are you prepared to pay the price?

@ Arohan: I agree with you Arohan and you make some great points. You gave a great and quick explanation of what an increase in the corporate tax rate will result in. I favor a flat tax…15% income tax…8% corporate tax and 3% capital gains tax (those who claim they could care less about capital gains tax may want to look at what they have the majority of their retirement nest egg in).

In respect to you your last response directed at me:

You are right, actions have been taken and there is nothing we can do about it so if you can’t fight it you may as well profit from it. When it comes to ideas on how to accomplish that there are so many opportunities out there in the markets right now that it is almost pathetic to find something which will fit each investors portfolio.

You are right, we do have a nice discussion going here…

Apollo’s last blog post..Bank of Canada tinkers with rates…

a. You are touching on the question “What is the role of the Government” and I agree with you that the role of the government is to ensure that the basic rights and opportunities are available to all citizens. I agree that the government should implement this basic responsibility through programs and policies to help ALL of its citizens. And I completely support those programs and policies.

However, the question is whether to target these benefits directly to the relevant group of people or as in Senator Obama’s case, implement this via the tax code which will award some of these benefits to the undeserved while at the same time have other consequences that actually hurt the American economy. While we are debating which tax proposal does more to help the ‘working poor’ there is something that the McCain campaign is either unable to communicate or they get bogged down in the Obama spin machine. Please read this article on Financial Times.

b. Increase in corporate taxes on “rich corporations or small businesses” may sound good but consider who really pays for it. Do you think Wonder Bread will simply absorb these extra taxes as a cost of being patriotic? Nope, one of two things will happen. Either Wonder Bread will determine that extra tax makes the business uneconomical if absorbed and there fore they will slow down growth and hiring (or if the situation is really bad, cut production, lay off employees or even go out of business), or alternatively, they will raise the price of bread and pass on the tax increase to the consumers. In either of these situations the price of bread will go up. Who pays the price for bread? Does it hurt the “rich” more than the “poor”? I took the example of Wonder Bread, but the story will be similar in all the items that common folks consider necessities like, gas, utilities, groceries, rent, etc. Consider this too, the increase in price of bread reflects higher taxes that will now be paid by the farmers, trucking companies, bread makers, grocers, etc. And who suffers the most when companies start laying off employees? The rich or the poor??

Also take a note of the fact that the corporate income taxes in US are the 2nd highest in the developed world and is already a great disadvantage to American companies competing in the global market. Do you think making this situation even worse will improve our economic well being? Do you think making America the most expensive place to do business will help jobs come back to America??

c. Cindy McCain pays her taxes. And she helps many working slobs pay taxes as well by employing them in her business. I have nothing other than respect for all the hard working Americans who start and run businesses and create jobs in America. And I respect all working Americans who dream of a better future by working hard and doing right. But I have no respect for those that believe that these people should be punished for their success so the government can take care of ‘not fortunate’. I would rather these businesses given incentives to grow and continue to succeed and take care of ‘not fortunates’ by creating new job opportunities. Government’s role should be to level the playing field by providing conditions of equal opportunity. Beyond that it is an individual’s job to take the opportunity and make something of it based on their hard work and talent. Government’s job should not be to redistribute wealth.

Now if you contend that we should provide more opportunities to disabled or working mothers should be allowed more time to spend with their kids, etc, I will be in complete agreement. But that is not what is at stake with Obama’s tax plan.

Thanks for your patience

A Cindy McCain being made to pay some taxes on the 100 million dollars she has will not break her but.. it will a poor working class slob like myself! That is what we call leveling the playing field and redistribution of the wealth, not a handout but giving a hand like McDonalds,lol…Perhaps since McDonalds realizes it with it’s McDonalds’ house charities, is why they are so successful in the stock market,well that and they are always open,quite reasonably priced with their dollar value meals, are ofcourse world wide,convenient with their irive thru windows and quite tastey!!.

-Artzstuf

I think they could have called the bailout anything they wanted but it remains an act of socialism and as you said time will tell how long this will last.

Another point I disagree with is that we will not see how bad things would have gotten without the intervention in free market capitalism as now the overall impact will be drastically more negative and the crisis will be prolonged.

Sure, time will tell but by then it is too late to react and profit from it.

Apollo’s last blog post..More and more earnings reports come in…

Semantics aside, I readily agree that the markets should have been allowed to function without government intervention for its long term health. Short term issues however, trumped all the free market considerations and thankfully we will never know how bad things would have gotten absence the Fed/Treasury intervention

As for shorting, I do not short but I do not think shorting is bad. However, illegal naked shorting needs to be eliminated along with the use of CDS or other tools to artificially drive a company out of business. So yes, I agree that limited regulation needs to be there but needs to be effective.