Author Topic: Blue chip valuations at the nadir of the 1930s market crash  (Read 2673 times)

Graham Osborn

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Blue chip valuations at the nadir of the 1930s market crash
« on: February 12, 2018, 12:50:11 PM »
Although the market valuations in 1929 were quite high, it's easy to forget that a lot of blue chips were trading at half book or less after the crash.  Admittedly, some of these companies probably had a lot of goodwill in their book values from acquisitions during the boom times, but still:

https://www.joshuakennon.com/a-look-at-some-major-stocks-during-the-bottom-of-the-1933-stock-market-crash/
« Last Edit: February 12, 2018, 01:11:29 PM by Graham Osborn »


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Re: Blue chip valuations at the nadir of the 1930s market crash
« Reply #1 on: February 12, 2018, 01:22:56 PM »
For small to mid-caps Canadian energy stocks, it is pretty much like 1933 right now.

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RichardGibbons

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Re: Blue chip valuations at the nadir of the 1930s market crash
« Reply #2 on: February 12, 2018, 08:06:10 PM »
I wonder about whether the energy stocks are buggy-whip companies.  It feels like we're on the edge of a pretty fast transformation to environmentally-friendly energy sources (e.g. the economics of solar and wind, the move to electric vehicles, the move to autonomous vehicles).

I wonder what will happen if, for instance, demand falls by 5M barrels over the course of a couple of years and then keeps declining.  With a commodity like oil, I feel a 5% drop in demand could nuke prices.  Thus, it seems to me that energy doesn't have much margin of safety when the demand is uncertain.

I'm curious what perspectives other people have on this.

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Re: Blue chip valuations at the nadir of the 1930s market crash
« Reply #3 on: February 13, 2018, 07:58:11 AM »
First step is to stop drinking the Liberal cool-aid Richard. I know it will be hard for you, nearly impossible.

Second is to look at hard numbers on supply, demand, EV impact, renewables growth, etc. We have an extensive and active thread on this website, unless you missed it, where many people have chimed in and provided ton of data from various sources.

Third, make your own call.

However, statements like these do not pass the smell test: "It feels like we're on the edge..."

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oddballstocks

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Re: Blue chip valuations at the nadir of the 1930s market crash
« Reply #4 on: February 13, 2018, 08:15:37 AM »
I love the idea of renewables, but sun doesn't shine at night and wind isn't constant either.  Until we get Silicon Valley to solve those problems we're going to need something else to fill the gap.

In terms of blue chips being cut down...

This wasn't just in the 1930s crash.  Look at any major crash and it happens everywhere.  What's unique about the US is we haven't experienced this again.  We had the 2008 crash, but everything bounced so quickly.
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RichardGibbons

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Re: Blue chip valuations at the nadir of the 1930s market crash
« Reply #5 on: February 13, 2018, 11:10:06 AM »
Second is to look at hard numbers on supply, demand, EV impact, renewables growth, etc. We have an extensive and active thread on this website, unless you missed it, where many people have chimed in and provided ton of data from various sources.

Yeah, that's what I've done, and what's inspired my comment.  The interesting thing is that, if I listen to liberals as you think I am, my conclusion would be that nothing is being done to target CO2.  It's mainly the non-liberal point of views that are leading me in the direction of: "change is coming". 

Of course, I suppose that your way of communicating is to constantly use ad hominem attacks before substance, so I'm not really surprised that you responded to my honest question in this way.  It's a pity though, because I feel like you could actually contribute a lot of value if you weren't so angry.


RichardGibbons

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Re: Blue chip valuations at the nadir of the 1930s market crash
« Reply #6 on: February 13, 2018, 11:16:26 AM »
I love the idea of renewables, but sun doesn't shine at night and wind isn't constant either.  Until we get Silicon Valley to solve those problems we're going to need something else to fill the gap.

I agree with that--barring a significant breakthrough like cold-fusion, I don't think we get rid of all combustion-based generation.  But if we are able to get rid of half, I would still think that would have a huge impact on the use of oil and gas.  I really like the theoretical idea of using electric vehicle batteries to address variance in demands for electricity, even if there are huge practical issues with that strategy.

DTEJD1997

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Re: Blue chip valuations at the nadir of the 1930s market crash
« Reply #7 on: February 13, 2018, 11:17:38 AM »
I wonder about whether the energy stocks are buggy-whip companies.  It feels like we're on the edge of a pretty fast transformation to environmentally-friendly energy sources (e.g. the economics of solar and wind, the move to electric vehicles, the move to autonomous vehicles).

I wonder what will happen if, for instance, demand falls by 5M barrels over the course of a couple of years and then keeps declining.  With a commodity like oil, I feel a 5% drop in demand could nuke prices.  Thus, it seems to me that energy doesn't have much margin of safety when the demand is uncertain.

I'm curious what perspectives other people have on this.

I am unsure which part of the country you are in...but in the MidWest electric cars are more common than Ferraris but LESS common than Porsches.  Electric cars are well LESS than 1% of the market where I am at.  Even if the number of electric vehicles sold increased by a factor of TEN, they would still be a tiny minority of the cars on the road.

I would also venture a guess that the 3rd world will still be working with ICE vehicles longer than the west does, as it will be cheaper.

Then you've got the whole truck situation.

As to vehicle sharing...I don't really see that spreading farther than NYC and places where subways are viable.

There are ton of people that need vehicles at specific/random times and they need the vehicle NOW, and thus need to own one.  There is another large set of people that store stuff in their vehicles (think work tools) and thus need to own a vehicle.

A lot of the trendsetters in NYC/LA think that the rest of the country operates/thinks exactly the way that they do...this can lead to dangerous/false assumptions.  The best example of this is the election of President Trump!

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Re: Blue chip valuations at the nadir of the 1930s market crash
« Reply #8 on: February 13, 2018, 11:25:03 AM »
"I wonder what will happen if, for instance, demand falls by 5M barrels over the course of a couple of years and then keeps declining.  With a commodity like oil, I feel a 5% drop in demand could nuke prices."

If you were not putting out there comments such as these which indicate zero research on your part, then you would probably get a kinder response from me. Yup a lot of substance... 5 million barrels/day in a couple of years... Wow!

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RichardGibbons

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Re: Blue chip valuations at the nadir of the 1930s market crash
« Reply #9 on: February 13, 2018, 12:17:35 PM »
If you were not putting out there comments such as these which indicate zero research on your part, then you would probably get a kinder response from me. Yup a lot of substance... 5 million barrels/day in a couple of years... Wow!

Come on, you and I both know that nothing I write will ever get a kinder response from you.

In 2008, oil demand in the USA alone fell by 1.1M barrels in a single year without the tailwinds of rising environmentalism and the compelling economics of renewables. 5M is unlikely but plausible, particularly considering that pretty well everywhere but USA cares about climate change.  (Plus, I think you don't really understand the concept of tipping points, but whatever.)

That said, I understand your reaction.  If a hypothetical scenario would completely annihilate your portfolio, it's more comfortable closing your eyes and attacking the hypothetical than seriously thinking about the question.

(The irony is, I think I'm probably doing you a disservice on this thread.  By raising these questions, I'm making you entrench yourself into position which will make you slower to change your opinion when scary stuff starts to happen.  Sorry for that.)