5 Signs Irrational Exuberance Is Back -- 2010 Edition

In October 2009, I highlighted 5 Signs of Irrational Exuberance. One year on and investors don't look any the wiser. It's not as if nothing has happened in between; the events of the past 13 months should have taught investors that the aftermath of the credit bubble will be felt for years to come and that the "path out of the woods" remains highly uncertain. Despite this, multiple classic tells of exuberance are once again on display (along with a couple of new ones):

  1. Stocks are overpriced. Overvaluation is the most telling observation of exuberance. At a cyclically adjusted price-to-earnings (CAPE) multiple of nearly 22, the S&P 500 provides damning evidence (the CAPE is based on average inflation-adjusted earnings over the prior 10 years). Professor Robert Shiller of Yale, who compiled the CAPE data series stretching back to 1881, found that stocks have declined on average roughly 2% per year during the decade that follows a year in which the multiple exceeds 20.
  2. Junk debt is at premium prices. "I don't see value in the high-yield market; you are not being paid to take risk," Mark Notkin told Bloomberg recently. Notkin manages the $12.8 billion Fidelity & Income Fund, the third-largest -- and the best-performing -- mutual fund focused on junk bonds. He isn't alone in thinking high-yield bonds are overpriced. The smart money has been exiting the market while yield-starved individual investors continue to pour money into high-yield mutual funds, pushing prices to three-year highs this month.
  3. The VIX is cheap. Labeled Wall Street's "fear gauge," the VIX is derived from the prices of options on the S&P 500 index. During periods of financial turmoil, investors are willing to pay up for protection against price declines, pushing the VIX up. Conversely, as investor fear recedes, option prices, and, hence, the VIX, tend to decline. At its current value of 18.95, the VIX remains slightly below its average going back to its 1990 inception. Is there any way in which one could label the current environment "below-average" in terms of uncertainty? "Extreme/exceptional" is a lot closer to the mark. Super-investor Seth Klarman says he is "more worried about the world, more broadly, than I have ever been in my career" (more on Klarman coming up). Even General Ben Bernanke told Congress in July that the economic outlook "remains unusually uncertain."
  4. "Lambs to the slaughter" bond offerings. I can offer no other description of Mexico's 100-year bond issue priced to yield 6.1% in October. It should be evident that investors are accepting an inadequate return to hold a long-dated promissory note from a country that spent almost 60% of the period 1825-1940 in default. The same goes for Goldman Sachs' (NYSE: GS  ) 50-year issue, priced to yield 6.125%. This is an institution that ran a significant risk of failing twice in the last 40 years and three times in the last 80 years.
  5. A super-investor returns cash. In a letter dated Nov. 8, Klarman told his investors he would return 5% of their stake at the end of the year, explaining that "today, Baupost's opportunity set is smaller than it has been in some years." Klarman is a genuine investing legend with one of the best long-term investing track records out there (19% annualized returns since 1983 in his main fund). This isn't just a vote of no-confidence on stocks, either. Klarman is a nimble investor who is comfortable investing across asset classes, whether it be in bonds or real estate. If his opportunity set has shrunk, that suggests that risk assets are broadly expensive.

I'm not trying to sound like a curmudgeon in pointing all this out, but I firmly believe that investors need to adopt a highly defensive stance right now; not because I said so, but because the facts on the ground demand it. There is nothing wrong with holding more cash than usual at this juncture; as Klarman pointed out in a 1983 investor letter:

Cash is a way of safely doing nothing until compelling investment opportunity arises. It offers positive, albeit very limited yield, complete safety of principal, and full and instant liquidity. A low positive return ... is not a bad proposition in the absence of better alternatives.

If you are putting money into stocks now, I strongly recommend you look at the shares of high-quality, "franchise" businesses, which look reasonably valued as a group. I like General Electric (NYSE: GE  ) at these prices, for example, and I also like the four top commercial banks as a basket: Bank of America (NYSE: BAC  ) , Citigroup (NYSE: C  ) , JPMorgan Chase (NYSE: JPM  ) , and Wells Fargo (NYSE: WFC  ) .

If you'd like more investment ideas -- ones The Motley Fool is putting its own money behind -- simply request our free report "5 Stocks The Motley Fool Owns – And You Should Too."

Alex Dumortier, CFA, has no beneficial interest in any of the companies mentioned in this article. The Fool owns shares of Bank of America and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On November 25, 2010, at 2:59 PM, modeltim wrote:

    While I concur that things in the world seem about as bad as they've ever been in my lifetime, I for the life of me can't understand why anyone would want to put my stock money into any of the "too big to fail banks" mentioned here, esp. BAC. BAC and it's ownership of Countrywide with tens of thousands of bad loans leave it exposed to many billions in potential losses. Am I missing something?

  • Report this Comment On November 25, 2010, at 4:01 PM, rlaakso wrote:

    I feel exactly the same way about investing money in these bank stocks. Why do you feel they are a good investment right now? I can think of more secure stocks for this economic environment.

  • Report this Comment On November 25, 2010, at 4:56 PM, ozzie wrote:

    Hmmm - Ebay selling at $400 (200 times projected earnings) and AOL at 170 Times projected earnings. THAT is irrational exhuberance defined. I am honestly not familiar with "CAPE", but I do know that P/E ratios for the S&P 500 are near their historic LOWS. Not exactly my definition of "irrational" NOR "exuberant". It is curious when you hear some super-investors say "nothing is cheap these days", but the level of M&A activity seems to indicate otherwise. Perhapse when EVERYTHING is cheap, it is hard to find something RELATIVELY MORE cheap, who knows!?!?

  • Report this Comment On November 25, 2010, at 5:16 PM, midnightmoney wrote:

    What on earth was 50 stocks in 50 days about, or have I been hallucinating again? Yes, I loved it and therefore quite clearly remember the premise: now IS the time to be investing in the market, and you all came on screen and said as much.

    Another thing. Back in April you wrote that, based on valuation and debt load, GE wasn't as good a buy as 3m, so here I'm wondering what has changed at the former to such an extent that you've done a 180 and are now recommending it. A snippet of what you wrote:

    "Boasting similar multiples, higher estimated earnings-per-share growth, and lower financial risk, I prefer 3M to GE. If you prefer GE, you should be able to explain why it deserves a higher multiple than 3M or why analysts are underestimating GE's future earnings growth. Based on this initial comparison, I expect 3M shares to outperform GE's over the next three to five years"

    Could you say something more about why ge is now attractive, as I'd love to pick some up at current prices, but have heeded the debt-load arguments, both foolish and otherwise.

    Thank you.

  • Report this Comment On November 25, 2010, at 5:37 PM, midnightmoney wrote:

    Alex, Ok, I hadn't seen the hyperlinked article on GE above (10/30/10), so I understand a little better where you're coming from now. Still, is the ge p/e so low that it makes it a buy over other less leveraged conglomerates? The company does get its share of positive press on major new contracts (ie the c919s in China) and cutting edge technology.

  • Report this Comment On November 25, 2010, at 5:57 PM, Momentum21 wrote:

    Alex,

    I have nothing against advising someone to "sit on the sidelines" but simultaneously buying a basket of banks because they are validated by this CAPE multiple theory seems a little counterintuitive to me.

    And as for Klarman...he manages $20+ billion and has crushed it over the past 18 months. Giving back 5% is a win-win for him...who will ever question that call regardless of the outcome? He has different issues than the average investor when it comes to deploying investor dollars. At some point the size of the fund can make success much more cumbersome.

    I don't think you are sounding like a curmudgeon...I just think the premise here is wrong.

    Be defensive due to the macro climate surely...irrational exuberance being back is something I do not buy based on your 5 points.

    I do like the analysis in your last article, The Cheapest Industry Leader in the Market Today...

  • Report this Comment On November 25, 2010, at 6:26 PM, ronbeasley wrote:

    Larry Fink and Warren Buffett find equities attractive. But what do they know. Let's go with Alex Dumortier.

  • Report this Comment On November 25, 2010, at 7:01 PM, grantrobertb wrote:

    Even if there are attractive buys at the moment, I think overall the economy is hamstrung by debt. Most consumers are still maxed out, and until saving rates get to comfortable levels, and debt burdens ease, I do not see the economy humming on all cylinders. Having said that, if we learn our lessons, we might just come out on the other side with an even stronger and longer bull market?

  • Report this Comment On November 25, 2010, at 8:18 PM, ecloud wrote:

    And yet the Fool's paid services have to continue to suggest something, to retain subscribers.

  • Report this Comment On November 25, 2010, at 8:31 PM, richie54 wrote:

    Alex,

    I just downloaded my monthly statement from Bank of America and found out they lowered the interest they're paying on savings accounts to 0.05%. Not a good sign for the big banks that you're railing for.

  • Report this Comment On November 25, 2010, at 9:31 PM, neutrinoman wrote:

    There's always something phony about asset markets pumped up on QE.

    The call for "franchise" and dividend stocks is great. But stay away from the big banks, even JPM. Try Chris Whalen's "righteous banks" list, which is made up of the highest-quality banks with little or no real estate crap on their balance sheets.

  • Report this Comment On November 25, 2010, at 9:47 PM, nonzerosum wrote:

    Your reasons:

    1) CAPE doesn't account for layoffs,global gains on weaker dollar (very different from CPI), structural changes, technology improvements, etc. Many companies at P/Es around 10 with positive growth.

    2) This says the bond market is in a bubble.

    3) Good point. This does bother me. Maybe we are too complacent. Maybe market is predicting a trading range?

    4) This says the bond market is in a bubble.

    5) Past performance...

  • Report this Comment On November 25, 2010, at 10:15 PM, MFRichard wrote:

    @osborta: S&P 500 P/E near historic lows? Where did you get that graph?...do you need a prescription to get one?...great article, stocks were a really good buy since mid 2008 and will be thru december, but after that...better get rid of them before 2011 comes and takes your money away again...disclosure: staying in cash til markets get cheaper.

  • Report this Comment On November 26, 2010, at 1:44 AM, TMFAleph1 wrote:

    Who is Ron Beasley?

  • Report this Comment On November 26, 2010, at 1:53 AM, dragonLZ wrote:

    If I were Alex D., I would try to hide my 2009 post, not advertise them (like he made some kind of a good call a year ago).

    Take for example his article This "Junk Rally" Could Burn Investors from August 12, 2009:

    http://www.fool.com/investing/value/2009/08/12/this-junk-ral...

    What happened since then?

    S&P500 had a nice 20% return, and every single stock mentioned in his article as a "junk" stock had outperformed S&P500 by quite a bit (and I mean QUITE A BIT like in 3:1):

    F is up 107%, CAT up 78%, and FCX up 60% since ALex made his "a possible burn" call.

    The only two stocks mentioned in that article that are underperforming the market are stocks he considered winners:

    MSFT returned "astonishing" 8%, while his XOM pick returned a "solid" 1%.

    So, it is not that the market had a case of Irrational Exuberance a year ago, it's Alex who had a case of Irrational Anxiety is what I think (Graham's Intelligent Investor tells us that's the best time to be in stocks).

    p.s.

    I don't know about you guys, but I'll be selling when Alex tells us it's safe to start buying again... :)

  • Report this Comment On November 26, 2010, at 1:59 AM, dragonLZ wrote:

    Oops, I forgot to mention that one of the stocks Alex identified as winners (AMZN) had a 106% return since Alex posted that article back in August of 2009.

    By his way of thinking (which he displayed in the original "burn" article"), wouldn't that mean this is not a "junk rally" any more?

  • Report this Comment On November 26, 2010, at 4:09 AM, afamiii wrote:

    One year ago anyone who had taken your advice would be considerably financialy weaker.

    Anyone who did not recognise opportunities to buy right equities at right prices last year should not be in the game.

    Buy right and sit tight is one of many valid investment strategies. And buying right means buying companies with the right attributes (i.e. competitive advantage, market position, profitability, balance sheet risk, market outlook, etc.) at fair (or discount) prices.

    Right equities at right prices are still very much available in both US and global equity markets.

  • Report this Comment On November 26, 2010, at 4:24 AM, goalie37 wrote:

    Not sure I get the logic...something about too much risk and too little reward followed by a suggestion to buy 5 companies that all received bail out money and cut their dividends in the last couple years. I can't say whether those stocks will go up or not, but I'm not sure someone should go there looking for safety.

  • Report this Comment On November 26, 2010, at 9:29 AM, silverminer wrote:

    Great article, Alex!! I hope this will help a lot of people to safeguard a portion of their hard-earned capital from the risk of a major market retreat.

  • Report this Comment On November 26, 2010, at 10:30 AM, TMFHousel wrote:

    "I just downloaded my monthly statement from Bank of America and found out they lowered the interest they're paying on savings accounts to 0.05%. Not a good sign for the big banks that you're railing for."

    Actually, that's fantastic news for banks. Being able to retain deposits at near 0% and lending it out at 5-20% is as close to free money as it gets.

  • Report this Comment On November 26, 2010, at 11:22 AM, TheDumbMoney wrote:

    dragonLZ: Just because the S&P has gone up 20% in the last year or so, that does not mean it wasn't in a junk rally at the time, nor does it tell us anything about whether it's junk now, either. Personally, I think the market is overvalued, because of CAPE; I put no additional money in at the beginning of this month, and likely will not next month (though MSFT keeps calling). But the point is that what the market has actually done says absolutely zero about the basis for all that doing, nor anything about the sutainability of that doing.

  • Report this Comment On November 26, 2010, at 1:02 PM, jrj90620 wrote:

    Cash today is totally fiat and is therefore the common stock of govts.So,if you sell your stocks of good companies and go into cash,aren't you just exchanging good assets for bad(the common stock of a bankrupt govt)?As long as govts' central banks are devaluing their fiat aren't you better off avoiding it?Wait until govts are forced to support currencies due to high inflation,by raising interest rates, to switch to cash,in my opinion.

  • Report this Comment On November 26, 2010, at 3:57 PM, Glycomix wrote:

    What do you suggest? Buy Puts leaps on ETFs?

    With the Fed's Quantitative Easing-2, I don't want to bet on a short-term downturn in the stock market.

    I belive that the market will bounce down after hitting it's high equivalent to April, but many individual stocks are at 2 year lows and so, good buys.

    For example, PBR is at a 2 year low based on euro-debt and China's central bank's efforts to combat inflation.

    Information that suggest that this stock should go up?

    1. - Nov 19 announcement that Brazil has discovered more proven oil reserves

    2.- Nobel Oil's claim (in Oct earnings call) that the US will be out of oil in 10 years if we don't drill in the gulf or in Anwar in Alaska.

    (Pres. OBama's Dept. of Interior is moving at a glacial pace allowing drilling in the gulf for American firms, although they've financed a boom in Mexico's oil production: OBama loaned Billions to Mexico to drill only a few hundred miles away from American sites. )

    There might be other investment opportunities out there.

    Why not share them fellow fools?

  • Report this Comment On November 26, 2010, at 7:18 PM, TheDumbMoney wrote:

    Fiat is a car company.

  • Report this Comment On November 27, 2010, at 1:05 AM, IAO1985 wrote:

    How does any feel about a basket of distressed European banks, Such as IRE, AIB, NBG? I know it would be purely speculative but if just one of these banks recover than there could be high payoffs. It seems a basket of these stocks could be a high risk, high reward investment. What do you guys think?

  • Report this Comment On November 28, 2010, at 3:08 PM, midnightmoney wrote:

    distressed banks = distressed people. Couldn't wait even for jpm to go up before I got rid of it, the coming dividend boost be damned. If investing in banks is what investing is about you can count me out. I'd sooner die poor.

  • Report this Comment On November 28, 2010, at 9:09 PM, TMFAleph1 wrote:

    <<If investing in banks is what investing is about you can count me out. I'd sooner die poor.>>

    Sounds like a rational position.

  • Report this Comment On November 29, 2010, at 7:39 AM, midnightmoney wrote:

    "sounds like a rational position"

    hyperbole will seem irrational, at least as much so as the situation that provokes it. Have just been reading about jpm's role in manipulating silver prices, but it was the robo-signing fiasco that compelled me to sell. The most rational thing I can think to say is I hope none of the really egregious stuff is true. While I don't know if it is, I'm not about to stick around and find out. Bad, bad headlines apropo the banks dropping like bombs all over my portfolio brought me to sell. Seemed a very rational decision at the time.

  • Report this Comment On November 29, 2010, at 1:09 PM, dragonLZ wrote:

    "dragonLZ: Just because the S&P has gone up 20% in the last year or so, that does not mean it wasn't in a junk rally at the time, nor does it tell us anything about whether it's junk now, either."

    dumberthanafool, really?

    The S&P500, an index is made up of 500 largest companies in US is up 20%, and we still think it's a "junk rally"?

    As far as I know, all bull market's start with "junk" rallies (cheap stocks - stocks of companies that got beaten down to incredible levels because of fears of bancruptcy, show the best "performance").

    Please explain to me what was so wrong with investing in F and CAT (or AMZN) when Alex made his "junk rally" call and doubling your money since then?

    What's junk about it?

    Please explain.

    p.s.

    I'm pretty sure back in 2009 BAC anc C were considered junk as well, but are now suggested to us as "best" plays for this market. Go figure.

  • Report this Comment On November 30, 2010, at 1:01 PM, astewboy2 wrote:

    I think people want to think positive because, well, it's much better than thinking negative and that's been going on for too long. Why it's better to focus on the companies themselves than what the market owning a piece of them is doing.

  • Report this Comment On November 30, 2010, at 7:45 PM, midnightmoney wrote:

    Back to rational, MarathonMan, if you're still tuned in. Here are the main headlines from the jpm page from yahoo's website, just below their main info. I haven't opened any of them, nor do I plan on it.

    * Ex-JPMorgan Banker Pleads Guilty to Rigging U.S. Municipal Bond Contracts

    * J.P. Morgan Asset Management names retirement head

    * WaMu Shareholder Tactic May Block Public From Hearing

    * "Ratting" Agencies Still Behind: Dave's Daily

    * [$$] Banks' Headline Risk Is Just Too Heavy

    * 16 indicted in alleged Denver fraud ring

    * Bernanke Tells Executives He’s Concerned About Jobless

    * U.S. bank credit spreads widen

    * U.S. banks shake off bond jitters

    * Bank Pay Practices Worsened Since Crisis, Study Says

    I could post the main headlines here from that site every day for a month and we could open a few just to see what they portend. I'd predict a good deal of fear and loathing.

  • Report this Comment On November 30, 2010, at 7:48 PM, midnightmoney wrote:

    And in light of the rumoured wiki-leaks, perhaps we should stay tuned in to BAC as well.

  • Report this Comment On November 30, 2010, at 10:03 PM, thisislabor wrote:

    @dragonLZ

    and where would you recommend alex's reader put their money in the future? why would you recommend it?

    as far as I am concerned alex's articles mostly have sound reasoning and good judgement from the past year to year and a half reading from what I can tell. the fact that the market thinks like lemings instead of like investors isn't the author's problem.

    @alex

    I agree with you that the price of the stock market is overpriced as a whole and in need of a correction. However I am starting to wonder if this is not the new state of things. PE ratios at 20+:1 ?

  • Report this Comment On December 01, 2010, at 12:20 AM, TMFAleph1 wrote:

    <<I agree with you that the price of the stock market is overpriced as a whole and in need of a correction. However I am starting to wonder if this is not the new state of things. PE ratios at 20+:1 ?>>

    @thisislabor,

    This is possible, I suppose; indeed, almost anything is possible in the financial markets. However, I still think there is little reason to believe in some sort of regime shift to 20-plus CAPE multiples as the norm. The historical record suggests the market is overvalued, and I think we should require alot of convincing before we say otherwise.

    Alex Dumortier

  • Report this Comment On December 01, 2010, at 5:05 AM, GreaterFoolYou wrote:

    Stock prices trade on the margin (danger!), PE low's today are based on Forward 12 Months FORECASTS. Get it? Costs can only be cut so much. Banks can fleece individuals only so long. PIIGS infest globe with Toxic Debt Dance.

  • Report this Comment On December 01, 2010, at 5:05 AM, GreaterFoolYou wrote:

    New Economy, Goldilocks?

  • Report this Comment On December 01, 2010, at 11:40 AM, dragonLZ wrote:

    thisislabor, so you think we should call the market and the people who doubled their money during the last 12 months (by investing in stocks the author picked as "junk") lemings.

    Interesting.

    I thought investors are trying to make money in the market, not sit on the sidelines (as the author advised us to do so we won't get burned by the "junk rally").

    Where would I invest?

    Well, first of all, I'd like to make sure you understand I didn't have a problem with the author's suggestion to invest in bank stocks (I like BAC, btw.)

    The "only" problem I have with the author is that he told us to stay away from the market in 2009, and is telling us the same thing again in 2010.

    And he makes it sound like in 2009 he made a good call when he told us that.

    Once again, these are the returns (as of today) of the 6 stocks he mentioned in his article from 2009:

    F +111%

    AMZN +108%

    CAT +83%

    FCX +65%

    ORCL +26%

    MSFT +10%

    XOM +3%

    Please explain to me what was so wrong with investing in these stocks when the author told us to stay away from the market (F, CAT, and FCX he called junk)?

    I don't think these returns are too bad, do you?

    p.s. If the author said something like: "I was wrong about the market in 2009, but here is what I think now", I would never had a problem with the author...

  • Report this Comment On December 01, 2010, at 12:44 PM, dragonLZ wrote:

    thisislabor, just to show you I don't discriminate against Alex, here is a link to a post in which I called out another TMF analyst for his bad call.

    http://caps.fool.com/Blogs/anand-chokkavelu-are-you/466639

    I'm not a hater, I just think people need to take responsibility for their bad calls - especially if they are paid analysts (who also like to write "I told you so" articles).

    Telling people stay away from the market in 2009 maybe wasn't as bad of a call as telling people jump into the market in 2007, but it still did lose people money.

    Just my opinion.

  • Report this Comment On December 01, 2010, at 1:16 PM, Momentum22 wrote:

    Wasn't Shiller calling the market overvalued back in Feb of 2009 based on CAPE multiples?

    If the market falls to Shiller/Marathon Man's "fair value" where do you think the basket of banks are going to settle out?

  • Report this Comment On December 01, 2010, at 3:45 PM, TheDumbMoney wrote:

    dragonLZ, your wrote: "What's junk about it?Please explain." Please try to read before responding. I wasn't saying whether the rally is junk or not. I'm saying the mere fact that it has risen says nothing about the sustainability of that rise. Is that so hard to understand? We just don't know. Anybody who says otherwise "is selling something." A rise is just a rise, and its sustainability may not be known for years. By sustainability, I mean: what is its ultimate basis in increasing profits/earnings/cash flow, and, even more importantly, how sustainable is the underlying force driving such increases?

    As to specific calls, I'm not defending any specific calls. There is nothing wrong with taking a huge gain in CAT. But it's a cyclical, high debt, low margin company, and it's not something I would buy for the long haul. That said, it was quite predictable that less-stellar companies with high debt would benefit most from a rally..., and from easy fed money. But people like me, and I suspect the writer, could not care less. I chose instead to deploy my money in outstanding businesses that I think I can hold virtually forever. Yes, I missed your huge CAT gain over the last year, but in 2009 I bought MSFT at $20/share and INTC at $13/share and KO at $45/share and MCD at $50/share, so I could not care less. Hindsight is 20/20, but on a risk adjusted basis, people who bought such stocks have done much better. And, while people who bought marginal stocks now have to figure out how to redeploy their huge gains (if they're smart; if they're dumb they'll hold onto the marginal companies until they tank again), and incur tax liability unless they're trading in an IRA, I don't have to worry about selling anything, no taxes, no transaction costs. I have neither the time nor the intelligence to come up with investment ideas all of the time. I am quite convinced that for every home run I hit, I'm going to hit into two double plays, and have to pay taxes and trading fees for the privilege of doing so. This is all extremely cookie-cutter value-investing stuff. I would rather place long term bets on near-sure things, sleep better, think less, and spend time outside. In short, I am uninterested in someone's 100% one-year gain in F stock, but I AM interested in what they do with that money afterwards, and in knowing how much of it they subsequently lose.

  • Report this Comment On December 01, 2010, at 4:18 PM, dragonLZ wrote:

    dumberthanafool, fair enough.

    If that's your approach, I'm fine with it.

    p.s.

    You said: "But people like me, and I suspect the writer, could not care less. I chose instead to deploy my money in outstanding businesses that I think I can hold virtually forever."

    That's fair too, but from my experience, people who invest in "safe" stocks (and claim they do so so they can sleep better at night) are also the ones who cry the most when the market runs into a serious bear market?

    Just my opinion.

    Good Luck in the future!

  • Report this Comment On December 01, 2010, at 4:53 PM, TheDumbMoney wrote:

    Good luck to you, too, and I see you're very successful on CAPS, unlike me! My CAPS picks are all my real money stocks, though I didn't enter them all on CAPS at the time I actually bought, but rather when I first started participating in CAPS in February. As to crying, I will be sure to let you know if the next bear market makes me do so. I am sure it will, but I can also promise you I will sell none of the stocks in my CAPS portfolio (with the possible exceptions of T and HMC) unless the underlying investment thesis for the company changes.

  • Report this Comment On December 03, 2010, at 1:11 PM, dragonLZ wrote:

    dumberthanafool, I checked your portfolio and I think it looks great for a defensive player like you. I especially like GOOG and DIS.

    As you probably figured out from my comments, I'm more of a high-risk high-reward kinda guy (and I'm not gonna pretend like I haven't been burned before).

    In this post of mine you can see some of the stocks I like (make sure you give Volume Story a read).

    http://caps.fool.com/Blogs/are-you-kidding-me-hecla/482249

    Good Luck!

  • Report this Comment On December 03, 2010, at 5:17 PM, etdiii wrote:

    One of the better written and more logical articles I've seen posted on the Fool in some time. On the stock picks, GE and JPMorgan okay but I'm not sure of the other bankss. Besides, as a tax payer I may come to own then in the not to distant future.

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