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Diversification Is For Dummies - The Nifty Nine Never Mattered More
From the 4-horsemen of the dotcom exuberance (and apocalypse), to today's so-called FANG and NOSH stocks, and now 'Nifty Nine', investors could be forgiven for ignoring the benefits of stock market diversification that every commission-taking, fee-gathering asset-collector promotes and going all-in on a few 'easy to select' stocks to make the quick buck that everyone believes is their right as an American taxpayer. While the S&P languishes unchanged in 2015, these small groups of overwhelmingly propagandized stocks are up on average over 60%, but with a collective P/E of 45, they are not cheap (and perhaps should remember that when buying this momo, we are all Thanksgiving turkeys).
The long bull market in US stocks now in its seventh year, has grown much narrower. Previously dominated by smaller companies (which tend also to do better in the longer run), it is now being led by a handful of large stocks that are beginning to earn their own acronyms.
Some talk about the Fang stocks — Facebook, Amazon, Netflix and Google — while Ned Davis Research refers to the Nifty Nine, which adds Priceline, Ebay, Starbucks, Microsoft and Salesforce. (Note that Apple appears on neither list.) If made into indices, research by the FT statistics group shows that either of these groupings would have gained about 60 per cent for this year, while the S&P 500 is up about 1 per cent.
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What are the implications? The success of the Fangs is a symptom of the rise of a new model for the economy that revolves around services rather than manufacturing.
But it is best not to get carried away. All these companies are richly valued (Ned Davis puts the Nifty Nine’s collective price/earnings ratio at 45, double that of the S&P 500). They also look expensive when compared with their sales.
Hype and excitement around a few big companies, and eclipse for riskier small companies, are classic symptoms of the top of a bull market. For comparison, look at the “Nifty Fifty” companies of the early 1970s, or the first wave of web companies during the dotcom boom of the late 1990s — when it was fashionable to talk of a “new economic paradigm”.
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Of course, the exuberant upside of the FANGs or Nifty Nines is always obvious after the matter...

But why let that worry you - you are all smarter than the average investor, right? Just don't forget the lesson from The Thanksgiving Day Turkey... (via SHTFPlan.com),
The Black Swan Theory is used by Nassim Nicholas Taleb to explain the existence and occurrence of high-impact, hard-to-predict, and rare events that are beyond the realm of normal expectations. One example often put forth by Taleb is the life and times of the Thanksgiving Turkey.
The turkey spends the majority of its life enjoying daily feedings from a caring farmer. Weeks go by, and it’s the same thing day-in-day-out for the Turkey. Free food. Open range grazing. Good times all around.
The thinking turkey may even surmise that the farmer has a vested interest in keeping the turkey alive. For the turkey, it is a symbiotic relationship. “The farmer feeds me and keeps me happy, and I keep the farmer happy,” says the turkey. “The farmer needs me, otherwise, why would he be taking care of me?”
This goes on for a 1,000 days.
Then, two days before Thanksgiving on Day 1,001, the farmer shows up again.
But this time he doesn’t come bearing food, but rather, he’s wielding an ax.
This is a black swan event — for the turkey.
By definition, it is a high-impact, hard-to-predict, and rare event for the turkey, who not only never saw it coming, but never even contemplated the possibility that it could occur.
For the farmer, on the other hand, this was not a black swan event. The farmer knew all along why he was feeding the turkey, and what the end result would be.
The very nature of black swan events make them almost impossible to predict. The point of this parable is to put forth the idea that sometimes we are the Thanksgiving turkey and understanding this may make it easier to begin to, at the very least, contemplate the possibility of far-from-equilibrium events.
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The farmer is the banksters et al who know darn well what is coming but keep "the Swan" hidden from the sheeple for as long as possible for their own benefit.
so, sort of.....
like a kid without fingers inheriting a bubble wrap factory
So, sort of........
Like the King and his noblemen built their castle out of paper. And,they store a lot of kerosene downstairs in open vats in a room lit by candles.
What could ever go wrong ?
Kinda scary put like that.
But in the last few decades we have seen Banksters and Politicians reach new highs in bare face boldness and lying.
Lies are the currency of power.
Taleb Rules! ok....A true Rockstar Thinker as evidenced in Fooled by Randomness (ultra life changing) and Anti-Fragile a magnum opus.
Winners waiting for pickup.
I like lean, boneless, porkchops, in "honey teriyaki marinade. They're really inexpensive, and tasty, on my BB-Q.
Pork prices are exceptionally low, for you non Erdogan lovers... :-)
I agree. We split a hog from a small local butcher 75/25 not long ago but we have eaten most of it already. I may buy another one. The smoked bacon is to die for. That bacon was smoked the way it was supposed to be done. It was like $450 cut and wrapped for the whole hog and about 250 lbs. That is not a bad deal. I want 250 lbs of that smoked bacon is what I want. You just will not find bacon like that anywhere. Not commercial at all.
The problem of these nifty nine is not that they are expensive and centered about the "new" economy.
A small look shows they also compete with each other so as a collective it is unjustifiable.
Same with this crazy Hamburger bubble. People look for a new Macdonalds so bid up everything that sells a hamurger but as a collective it makes no sense.
Buck Owens: "I've got a tiger by the tail it's plain to see. I won't be much when you get through with me."
https://www.youtube.com/watch?v=UGYE77y4qY4
You can thrown in the FANG buyers.
There is no way the GAAP P/E on that group is 45. More like 145. He must be using Bloomberg's fake "Adjusted EPS" where all one-time losses are ignored and all one-time gains are classified as "Income."
By the way, internet stocks are hardly alone here. Alcoa, which ash the seminal role of leading off Earnings Season, records a relatively constant amount of its normal costs of doing business as "One-Time Expenses."
Was driving along with my middle-schooler yesterday, and saw a big fat pig sunning himself.
I said: "Look at that big fat pig. What a life he's got."
My son says: "All I see is bacon and Christmas ham"
FAG better describes Cuckerberg.....does anyone really belive that fairy has sex with women?
If fhe does, he does what Charlie Sheen does: He pays them to leave.
Here's Hitler's Thanksgiving Dinner rant, that I saw on the SHTFplan.com
https://youtu.be/gED1qwBVu8I
In the original audio, he first goes on about weaklings and how he takes his queues from Nature, that does not tolerance weaklings. After getting the report about an English press article, he comes unglued about Himmler -- his most loyal of the loyal -- who claimed that Hitler was 'ill' (sick in the head) in this clip, and who in real life actually fled to Bavaria, but was caught by the Allies.
According to the chart FANG has nother 2500% to go before we need to get worried. So, what's the post trying to illustrate?