Bubble, or no Bubble?
There are a lot of people calling this market a bubble. I for one don't think it is. Let me tell you why. EARNINGS. in the tech bubble of the 90s we had stocks that had never turned a dime of profit trading at 60 70 or even 100 dollars per share. that is not a good thing for long term holdings. In today's markets we have a lot of things going for us that we didn't back then. In the end I am going to keep it simple. looking for companies who have a one year earnings growth rate that exceeds the P/E Ratio. I.e. if a stock has a P/E of 100 and a earnings growth rate of 100% in the last year I am OK. If corporate earnings are less or nonexistent, I am hot water when the market turns. Remember earnings drive prices and when we don't see earnings it is something else driving that demand. If we enter a bear market the company with no earnings will crater as smart money moves to value. so watch for good earnings on your bullish trades and stick to proper position sizing.
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3 comments:
Yes, I keep reading that the market is in a bubble. I am trying to divine the truth of the matter. I agree with you to look for solid earnings. Something else I am looking for is the debt ratio. Should interest rates rise, as is the talk now, and the company have a high debt ratio a slam to the market could hurt those companies that have to cover higher debt payments. I am content to give up some higher returns for a bit more safety in my position.
Looking at your BTU position. Do you think it is forming a bull flag on the one year chart? $50 appears to be a good support and looking at the 5 year chart, using a two line MACD, it may be setting up for a bounce. No doubt that coal and other forms of energy are showing signs of great strength at this time.
Good call on the bull flag...
Hey, I know the market is not yet closed; however, if BTU closes where it is now (around 49.90) would you consider that a break of the bull flag?
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