Hey, the first part of Friday’s column was pretty boring, no? I think I should have started with the “large point,” which I did think was important (thanks to Mark Hiatt, who wrote most of it), and not the smaller one.
So today let me get straight to the point: With the Dow pushing 10,000 and estimates for next year of 13,000 already floating around — all of which may come true (maybe 2000 will be the Hangover Year, or maybe There Will Never Be Bad News Again — or at least not Bad News Of The Type That Is Perceived As Bad, given the market’s current disposition to see the bright side of any development) — yes, this sentence has a second half, I am just getting “straight to the point” in my own annoying way — two ominous signs have just appeared in my mail.
The first was a solicitation to subscribe to Morningstar StockInvestor. This newsletter, they say, will attempt to recommend stocks based on their true value — and to steer folks away from those of the 200 most widely watched stocks that are overvalued.
This sounds seditious, if you ask me. And Morningstar has enough clout that — who knows? — “rational valuation” could become the latest fad.
And what exactly is a rational valuation? This is harder to say. But one young man who has done a good job of trying to say it anyway — and quite a few other good things — is Erich Riesenberg. His was the second ominous sign to arrive in Saturday’s mail. For Erich, it seems, has gone to extraordinary lengths to develop a website I was only the 469th person since November to visit — reason enough for you to take a look and get his numbers up. (He must have put 1000 hours into this thing, or, currently, better than two hours for each visitor.) He was writing in hopes I would check it out — www.InvestmentClass.com.
Basically, the site is Erich’s very sensible interpretation of rational investment analysis, the foremost and best known practitioner of which (you may by now be sick of hearing) is Warren Buffett, to whom Erich gives all appropriate credit.
One item of particular interest is Erich’s discussion of the analysis he did when he decided, a while back, to buy stock in Scott’s, the lawn care company.
Reading it, you might say . . . “Gee, this is really work!” In which case you should be in index funds — because it is work. And Erich addresses that issue, too. Most people are not securities analysts. And even most of those who are generally don’t beat the market, or by enough to justify the time they spend trying.
Anyway, getting these two things in Saturday’s mail, the Morningstar solicitation and a letter from a level-headed stranger directing me to his web site, is probably just coincidence and not the start of a full-fledged trend. Still, you have to wonder what might happen to the market if this “rational valuation” stuff actually caught on.
Quote of the Day
Markets are very good at what they do, in part because they harness greed and envy (in fact, all of the Seven Deadly Sins except sloth) and turn them into positive virtues.~Rocky Mountain Institute newsletter
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