What Does George Soros See About The U.S Stock Market Struggling Stocks, Booming Commodities

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Struggling Stocks, Booming Commodities

28.04.2005

The NASDAQ is down -12.5% ​​YTD in 2005. S&P500 index

suffered -5.7% this year. The US stock market was terrible

over the past few months.

Not only is the overall market down, but so have oil stocks recently

also a significant correction. It’s easy to get nervous

due to short-term failure. However, to succeed

with long-term focused value investing, we cannot be distracted

unstable short-term market movements. The time has come

step back and look at the big picture of the current stock

market and revise the investment strategy to generate profit in this way

harsh environment.

Total reserves and oil reserves

The chart below shows Energy’s performance over the past year

Index ETF (ticker: XLE) and S&P500 Index (ticker: SPY). Pa

looking at the graph, even a fool will know that the oil market

is on the rise, while the US stock market as a whole is struggling.

Simply put, the current US stock market is not optimistic

market. The heyday of the 1980s and 1990s, when anyone can

just put some money in an S&P500 index fund or a decent US

mutual fund to earn 10% to 20% plus annual performance

long gone. I expect that over the next 8 to 10 years, American stocks

the market as a whole will stagnate.

If you believed that 20 years of the stock market

performance between 1980 and 2000 is the stock market average

performance, you’ll be shocked to learn that it’s simple

before this period in the 1960s and 1970s the US stock market

did not go anywhere. Dow hit 995.15 in 1966 and Dow returned to 800

in 1982. If you were a long-term investor who invested in the

Dow index fund between 1966 and 1982, you got minus -20%

return a total of 16 years of loyalty, how would you

feel about it?

Do you still remember the peak of the NASDAQ 5000? in my opinion

The NASDAQ is a messed up index full of expensive stocks

even today. I predict we may have to wait for another one

decade to redefine the NASDAQ 5000.

The current average valuation of the stock market is not cheap

The SP&500 is currently trading at about 17 times its average PE today.

Although this estimate is not very expensive, it is not

which is cheap either.

Over the past 100 years of US stock market history, the market

usually bottoming out at an average PE of 10. This happened in 1974

or 1929 or 1980. We’re not there yet, not even close

over the past 5 years, even as the tech stock bubble burst

in 2000. We should see the bottom of the major stock market

many stable large-cap companies trading at low PE

teenagers Now look at this: Coca-Cola (KO) PE 20, Walt Disney

(DIS) PE 24. Even worse, non-growth stocks like Sun

Microsystems (SUNW) is still trading at a PE premium of 19.

What is the overall outlook for US stock market returns?

Although the current valuation of the stock market is not

cheap, if the salary is good, the market should work well.

Will we get an excellent overall revenue outlook in the

next few years for the US stock market as a whole?

Unfortunately, my answer is no. I guess US stocks

market returns are generally decent, but not good enough

cause a bull market. This market is still being digested

past overvalued bubble coupled with low returns

worldview.

This is one of the reasons for my not very enthusiastic salary

forecast: rising oil and commodity prices.

The price of a rapidly increasing commodity

The commodity and oil market has been developing rapidly since 1999

high commodity prices are reflected in the stock market as a whole

salary Companies have to pay more for essentials

in business: steel, copper, oil, natural gas, etc.

Historically, when the commodity market shines, so does the stock market

not very good, and vice versa. In 1960-70s.

oil and commodities have had a bull market for nearly 20 years

while the Dow Jones has had a terrible performance for nearly 20 years. From

From 1980 to 2000, the stock market soared and oil plummeted

like $15.

The growth cycle of oil and commodities can be very long

Jimmy Rogers is a well-known investor, co-founder of Quantum Fund

along with George Soros. In his recent book titled “Hot

Commodities,” he predicts the current commodity

the bull market may continue into 2013 solely due to supply and

demand.

In one of the chapters of the book called “Goodbye Cheap Oil”, he

clearly lays out the reasons why oil and natural gas are bullish

the market may last until the next decade. It’s as simple as

supply and demand: rising demand combined with falling demand

supplies.

In part because of this, supplies of oil and natural gas have declined

to extremely low oil and gas prices in the 1990s. More than 35

years there were no major oil discoveries in the world

old oil fields are being depleted. Extraction of oil and natural gas

the well level does not remain constant throughout the life of the well

reserve. The production rate of the well is actually decreasing

gradually due to the geophysics of the oil well to the reserve

completely exhausted. Even there, a new oil field has been discovered

it will take ten years after discovery to actually produce

Oil! Increasing supply to meet demand is very difficult

and a slow process.

Coupled with a decline in supply, demand for energy from

China has doubled since 1990, consuming 8 percent of the world’s oil

in 2004, the US economy is growing along with increasing demand for oil

year after year, while US oil production has risen sharply

decline over the past 50 years.

But the price of oil is not that high from a historical point of view.

Even with today’s oil price of 50 dollars per barrel, the price of oil

still much lower than adjusted for inflation

peak price of $90 per barrel in the 1970s.

Value investors don’t need a bull market to make money

As scary as potential problems in the stock market

a tough environment is a great time to make money

investors to pick up cheap stocks.

Warren Buffett is the greatest investor in the world.

Over the past 50 years, it has achieved 20% annual investment

years. However, Mr. Buffett’s performance in a bear market

In the 1960s and 1970s, returns were 30% per year, a lot

above his average.

Focus on cheap stocks and the fast-moving commodity market

Stocks don’t go straight up and they don’t go straight down. It will be

there could be a big rally or a sharp sell-off in the short term. While the market

not in good shape, this will be a great time for

long term investors.

The price of raw materials is unstable. Just like the stock market,

the price of raw materials does not go up or down.

Although the price of oil has weakened recently, I firmly believe this

the price of oil will not return to a cheap price below $40

a barrel While oil and natural gas prices remain high, oil

stocks will do great in their business. As painful as

the recent sharp selloff in energy stocks, energy stocks in the

generics are still very cheap and my investment strategy

continue a long-term focus on them.

In the short term, it is very difficult to know when stocks will be

to go up or down. But I know that assessment and salary

questions and investing in cheap stocks trade significantly

below the market average will be beneficial in the long run.

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