Stock market correction in October ?

Discussion in 'Stock Market Forum' started by Fredrick Jones, Jun 3, 2015.

  1. Fredrick Jones

    Fredrick Jones Well-Known Member

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    This expert is predicted that the US stock market is heading for a correction. Now that quantitive easing is decreasing there will no longer be the availability of cheap money. In my personal opinion many tech stocks like Apple and Google are overpriced. These stocks have never paid dividents and yet they have a worth more then small countries. I have no idea how someone can claim Apple and Google are worth more then a major oil company which actually has real assets and actually produces a real item.

    Google and Apple for the most part are selling ideas, the moment they stop coming up with new ideas they are worthless.

    Code:
    http://www.cnbc.com/id/102726185
     
  2. Onionman

    Onionman Senior Investor

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    Apple does pay a dividend, albeit the yield is probably about 1.5%. As to whether it and Google are overpriced that's been an area of debate for some time. The China story will probably bail out Apple for a bit longer (i.e. provide more justification for a bit more outperformance). But the problem with large-cap tech is that at some point the law of large numbers catches up - they become to big to grow and innovate at the rate the market requires it to. I've been wrong about Apple for some time so I don't know when the tipping point will be. But technology obsoletes or commoditizes at a faster rate than most industries, and we'll have to see how long both companies can justify their halos.

    As for the equity market, it's expensive, maybe not against bonds but certainly against history. The question really is whether any assumed weakness is orderly or severe.
     
  3. crimsonghost747

    crimsonghost747 Senior Investor

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    I do agree that some sort of a correction should come sooner rather than later. What I like about this guy is, based on this one article alone, he doesn't do silly estimates such as "in October" or "in June." Rather he sticks to much more reasonable estimates such as "within X months" or "within a reasonable amount of time".

    The thing is, no one knows these things and they are impossible to predict accurately. Thus giving a timeframe such as "october" is just as likely to be true as any other month picked at random.
     
  4. Fredrick Jones

    Fredrick Jones Well-Known Member

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    With Apple they are losing market share, and this has been happening for the last couple of years. The big problem Apple has is they are basically a design company and a marketing company. All of the manufacturing is outsourced. So initially Samsung was the first real competitor, but a Samsung for 2/3 the price of an ****** and get pretty much the same thing. Now that there are cheap Chinese Android phones, this puts in even more competition. Recently some of the Chinese knockoffs offer a heck of a lot for $100 or less.

    With google they offer a service. Their big money is in advertising, mainly adwords from the search engines, email and their mobile ad platform. So providing people continue to use their ad platform and other services they will do ok.
     
  5. JR Ewing

    JR Ewing Super Moderator Staff Member

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    Everybody and his brother is always predicting a correction. One will come sooner or later. Those who get lucky and time it right always declare themselves geniuses, even though they missed their last 5-10 predictions and will miss their next 5-10.

    Apple and Google have some things most tech companies don't - most impressively very substantial earnings and actual PE ratios. Both are still relatively cheap.

    And Apple has long gone way beyond being a cell phone company. They have much more going for them. Think "ecosystem".

    I've actually been getting away from those high flying tech companies that earn little or nothing like Amazon and Netflix. I believe they would fall harder in a correction than Apple and Google... but I could be wrong.
     
  6. petesede

    petesede Guest

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    There are thousands of ´experts´.. if you ask every expert, you would probably have every month covered for the next 5 years on´when´ the correction is going to take place.

    I am an expert, and I see nothing horrible coming in the near future. Also, you need to understand the definition of ´easing´.. This isn´t some third world economy with a dictator hacking at the economy.. this is a huge economy where they are adjusting things by .25% every 6 months and can use language to ´finesse´ things even on a smaller scale. All they have to do is say they are ´thinking´about easing.. or say ´there are signs that we may need to ease´ and that basically is a freebie ´easing´without actually easing..

    As far as Apple and Google. People have been saying the same thing 5 years ago.. and here we are. They are still growing at a rate that justifies their PE.... and to put it simply, there needs to be a reason other than ´it can´t possibly keep going like this´.. in order for it not to keep going like this. Apple is in an envious position of having a major product that is expensive enough to be a meaningful investment, yet have a short enough life span to where almost everyone will replace their product every year or two. They also are not even close to having worldwide saturation.
     
  7. crimsonghost747

    crimsonghost747 Senior Investor

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    Greece. They are not capable of paying their debt, not that they have been any time in the past 5 years. But right now in Europe the general opinion is starting to be against helping them out. But it's not only the people anymore, the controlling political parties in many countries are losing ground towards more populist ones, partly due to this whole Greece mess.

    They will most likely get another "help package" from the IMF or the ECB during this summer which will keep them afloat for a few months. All this based on their "cooperations and promising structural changes".. which is exactly what we have been saying for years.. but I'm not sure if they will be getting another one after that.

    If the above scenario happens and Greece either defaults or gets a huge portion of their debts forgiven, then that would certainly cause havoc on the market. It wouldn't do much to company financials but the markets would certainly react. Coupled together with these historically high P/E numbers, that reaction might be quite severe. Not a doomsday scenario by any means, more like a good buying opportunity. :)
     
  8. petesede

    petesede Guest

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    Sure, if you live in Greece, Argentina or Russia..I wouldn´t be happy.. Probably a little arrogant of me, but I guess I have been looking at it through the perspective of the USA. The USA is double-insulated against Greece. Greece is a small country and is not a huge trading partner with us.. and secondly the EU will absorb and spread out the economic pain from Greece before it hits us. If I were in the EU though, I would be much more worried about the approaching winter and Russia. Prices are soon going to start adjusting for winter which gives Russia a bit more leverage.
     
  9. crimsonghost747

    crimsonghost747 Senior Investor

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    But you know better than that. Even if the whole Greece situation will have very limited effect on US economy, the markets will still panick and people will sell. As I said it won't have a long term effect on the publicly owned companies in the USA or even in Europe, but it these kind of bad news will cause people to sell and the indexes to dip.

    Or do you really believe that if Greece defaults it will have little to no effect on the US stock market in the short term? In the long term, I don't think it will. In the long term I see it as a positive sign for Europe... but that doesn't mean that it won't cause a short term dip if/when it happens.
     
  10. petesede

    petesede Guest

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    I think that Greece defaulting is already factored into most indexes. Right now, the market is guessing the chances of Greece defaulting, and that is currently affecting the markets. For instance, if Greece Defaulting would have X effect on the markets.. people right now are saying there is a 30% chance Greece defaults, and so they are taking 30% of X into consideration. On the day that Greece defaults, the effect of that default would have already been fully realized in the markets.

    It is one of the things I mentioned in another post. The amount of news we get, and how frequently we get updates on this type of thing is very fast... What it means is that Greece is not going to default on a single day, instead they are going to default .5% over 200 days.

    And yeah, I also think no matter what. Greece is not going to have much of an impact anywhere. On the day they default, there will definitely be a lot of people selling, but the intelligent investor will know that the default has already been factored in and the panic selling will be a buying opportunity.
     

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