Carl: ‘This set of comments comes from April 17th and 18th, 2000. The NASDAQ was coming off of a month of very heavy selling and the index went from 5,000 all the way down towards 3,000. On April 17th and 18th the index shot up 472 points or 14% leading many to believe that it had bottomed. The NASDAQ closed at 3,793 on April 18th and has been chopped in half since that time . . .
“We’re telling people to buy tech stocks. I do think the bottom is over. Typically, with this kind of increase in volatility, the near-term returns tend to be sloppy. But in 12 months, it should be just fine.” — Jeffrey Applegate, chief investment strategist for Lehman Brothers.
“The Ciscos, the Microsofts, the Oracles . . . those companies will weather these kinds of storms.” — Richard A. “Rocky” Mills, branch manager at Sutro & Co.
“We continue to view most stocks (excluding dot-coms) as cheap, with an S&P 500 median (price-to-earnings ratio) of roughly 15 times 2000 estimates. Over the next 12 months, we believe the Nasdaq has 200 points of downside risk and 2000 points of upside potential, creating a ten-to one-ratio of reward to risk which makes this an opportune time to be aggressively buying stocks.” — Thomas Galvin, chief equity analyst at Donaldson, Lufkin & Jenrette.
“We do feel, however, most of the damage in the technology sector has been done. We think that we will see a turn. We’re very close to the bottom on this.” — Steve Wing of American Frontier Financial in Denver.
“It certainly reaffirmed that the notion of buying the dip — and that was some dip — still has some validity.” — Jim Waggoner, market and tech strategist for Sands Brothers and Co.
‘ . . . My favorite out of this group goes to Thomas Galvin’s comments. He actually estimated a 10 to 1 reward ratio for the NASDAQ but had it almost completely backwards as the NASDAQ ended up dropping about 2,000 points over the next year. This has to be one of the worst predictions that I have ever seen from a well-known Wall Street analyst. I swear that I must be the only one looking at this stuff. How these guys maintain credibility and continue to appear in the media is beyond me.’
☞ Thanks, Carl. This is a point I’ve been trying to make ever since The Only Investment Guide You’ll Ever Need was first published in 1978. Not that I could do any better than these folks. Well . . . maybe a little better than these folks. But in general, I sure don’t know how a company will perform in the future relative to Wall Street’s expectations for it. And if you don’t know that, you don’t know whether it’s stock is likely to rise or fall. It’s a tough game (another point I’ve been trying to make for 20-odd years). Which is why incurring expenses to play it generally makes less sense than keeping expenses to a minimum and investing most of your stock-market money through index funds.
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You see those charts that say if you put away $500 a year starting at age 20, by the time you're 50 you'd have a gazillion dollars. It just makes you ill that you didn't do it. You almost want to grab young people and shake 'em and say, 'Please don't make the same mistake I did. Please.'~James Carville
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