Taking a survey. Thinking about buying leaps.
why not?
Don’t just buy leaps on the basis of an informal poll on AF. If you actually understand Citi’s balance sheet, business model, and potential risks and feel that you can conservatively say its worth more tomorrow than today and it will remain a going-concern then invest. If you know nothing about any of the above you have no business investing (no offense implied). You are in fact speculating.
Nothing wrong with speculating. But I’d stay out of Citi, wasn’t the most recent news saying that it already agreed to give an option to the government to convert preferred (TARP injection) into common? Sure the bank might survive, but the common shareholders will get diluted in the process.
buying citi is like buying a house in cali, after all, thats what’s on its balance sheet. sure prices are down 50%, but theres nothing there to bring prices back up.
Well I think there is something wrong with speculating if your goal is to increase your wealth in the long run. You can only do that through investing, not speculating. Of course some will get lucky, just like betting on a horse race, but given that this is a CFA forum and the CFA was founded on Ben Graham’s dogma of investing over speculation then I think ValueAddict was not unreasonable in what he said.
Citi the company: yes Citi the stock: questionable
ValueAddict Wrote: ------------------------------------------------------- > Don’t just buy leaps on the basis of an informal > poll on AF. If you actually understand Citi’s > balance sheet, business model, and potential risks > and feel that you can conservatively say its worth > more tomorrow than today and it will remain a > going-concern then invest. > > If you know nothing about any of the above you > have no business investing (no offense implied). > You are in fact speculating. I don’t think they understand you. This question comes up quite a bit with people I know.
Carson, he never said what his goal was. Speculating doesn’t mean blindly putting money somewhere. You can speculate and still have some sort of analysis going, not necesarrily fundamental. Actually I think that technical analysis is speculation. It isn’t based on fundamentals like economic indicators or analysis of company’s balance sheets and cash flows. It still involves analysis. Plus, if you invest $ in a hedge fund that runs computer models which are based on technical analysis. Are you investing or speculating?
didnt bernanke and paulson / geithner explicitly say that the banking system will not be allowed to die? citi has a substantial, if not the largest, amount of retail deposits. i’m having doubts about b of a’s standing though…
Citi re-elects all of its board, looks like they failed to kick out incompetent board members, oh well. http://online.wsj.com/article/BT-CO-20090421-714433.html
this whole thing is a circus. market behavior right now is a circus.
if you think guys who invest on fundamentals have any more or less of an edge than guys that use technicals you are sorely mistaken. investing vs. speculation is a matter of time horizon, not edge.
stylemog Wrote: ------------------------------------------------------- > if you think guys who invest on fundamentals have > any more or less of an edge than guys that use > technicals you are sorely mistaken. > > investing vs. speculation is a matter of time > horizon, not edge. had you have invested in equity during the whole of the 19th century, you’d have accumulated an extreme 100-year real loss. had you’d have invested over both the 19th and 20th century, you’d have accumulated little to no real gain. compare to: making one investment and logging 10% in a matter of minutes on luck and/or skill (debatable, but i think that some have skill, some don’t, and some get lucky taking the right risk at the right time)
No one is advocating a buy and hold forever investment philosophy. Fundamental equity investors buy when their estimate of intrinsic value exceeds quoted market price and sell as it approaches their estimate of intrinsic value. If there is any confusion of the definition of speculation in security analysis - Chapter 4 - an entire chapter is devoted to this topic. The original poster was not using any analysis (technical nor fundamental). I was advising him/her that unless there is some sort of analysis going on then it might be prudent to take a pass. Also, LEAP implies a long-term perspective, which makes fundamental attributes more important than the good 'ole reliable head and shoulders chart. Discerning whether it will be a going-concern has nothing to do with technicals or a trade of the month or week or whatever. FYI: Matt, you are quoting the John Bogle defacto investment option. If you don’t have a copy here are some brief excerpts: “it is commonly thought that investment…is good for everybody and at all times. Speculation, on the other hand, may be GOOD (yes good with CAPS) or bad, depending on the conditions and the person who speculates.” “An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations no meeting these requirements are speculative.” Blah blah blah end of sermon. PSS: I like the circus. Watching animals is fun.
stylemog Wrote: ------------------------------------------------------- > if you think guys who invest on fundamentals have > any more or less of an edge than guys that use > technicals you are sorely mistaken. > > investing vs. speculation is a matter of time > horizon, not edge. If this was a CFA question I would answer FALSE. if I buy a crappy security and hold onto it forever or for 2 mins, that changes whether I’m speculating or not?
I don’t care anymore. Go buy the leaps for all I care. DO IT!!!
ValueAddict Wrote: ------------------------------------------------------- > “An investment operation is one which, upon > thorough analysis, promises safety of principal > and a satisfactory return. Operations not meeting > these requirements are speculative.” Speaking to Graham (haha) and you, if you believe his sermons, safety of principal and return are polar opposites. just because u.s. government bonds have provided both safety and a small return in the past on a real basis, doesn’t mean they will continue this trend. considering possible currency movements, possibility for an extreme increase in the money supply and resultant inflation or a government debt default on at least one issue, safety of principal and return are a zero-sum game. For equities specifically, just because the 1900s had less depressions than the 1800s doesn’t mean that the equities markets weren’t punished in similar ways. the numerous bouts with inflation clouded overall equity returns instead of nominally representing losses in the equity prices themselves. don’t trust your government and don’t be naive and think that the last or next century was or will be much better than the 1800s or before in terms of governance. i think the need to control every aspect of capital markets is going in the complete opposite direction that we went in the last 100 years. we’re entering an era where bonds are being punished for ever-growing equityholder’s rights. why should AIG’s, GM’s or any bankrupt company’s equity hold any value? the only reason why it does hold value is at the expense of bondholders (both corporate and government bondholders). either 1) current corporate bondholders are penalized by having to reorganize by force of government, preserving some value for current equityholders, or 2) current government bondholders are penalized when the government takes on further obligations to support the company, thereby increasing federal balance sheets, increasing inflation or default risk. Sure, the government is taking steps to prop up equity markets by ensuring that total loss is an impossibility, but in doing so, they are taking rights away from bondholders. the bond market is a much larger, more influential market. in doing so, they may force some bondholders to move to equity as equity’s rights are growing and bond right’s are receding, and further delever the system. i see it being possible that actions like this will cause an echo-market collapse of confidence in bond markets.
That was Graham not Bogle. I can’t read anymore. I will go back to the circus.
valueaddict, you do realize it is these people that make our endeavors possible right?