PurpAnd

Remember that friend that I had lunch with last week? Well he read my post and emailed some additional insight into the market. He also included thoughts on investing in general and some comments on my writing. As much as I think I know, he kindly reminds me that I don’t know everything.

Here are some snippets of his talking points:

In response to my affluence post… “Making sure to spend considerably on depreciating items is still important to us. While spending on appreciating items typically enhances our quality of life in the future, spending on depreciating items typically enhances our quality of life now… Life is all about balance.. everyone’s idea of balance differs, but balance is important.”

Good point. Without this balance, life would be less fulfilling.

In response to Friday’s stock market post… “You mentioned that as stock prices fall, that is like saying the market is “on sale”… you know I agree with this principle, but it’s worth mentioning that stock prices falling without new information is equivalent to the market going on sale. We have quite a bit of new information that we didn’t have a year ago though… and this information is alarming and inarguably, at least in the short-mid term, game changing.”

True, and just to clarify, I didn’t include a sub-surface analysis in my initial post because I was trying to avoid being too technical for the general readers of this site (although I can see this discussion becoming a more frequent topic, if not its own page, in the future). Furthermore, it is important for my readers to know that it is not the actual dollar price of the stock that I was talking about. Rather, it’s the price-earnings (PE) ratio that has come down for virtually every stock since last year. My point… the market is selling at a relatively low PE compared to historical levels (as long as forward looking earnings estimates are and will be somewhat accurate… we’ll see). And while the information we have now may justify the PE contraction, price levels are much more appropriate now for the investor looking for a good entry point into the market.

If you have questions about what I read, where I get info on the market, or {gulp} my opinions, feel free to email me at andy@purpand.com. I will try my best to answer your questions without putting myself on the hook.

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