Joined Dec 4, 2012
319 Blog Posts

Stupid Cheap

So I began this long journey of researching the stock market in 1986 when I graduated from college. Since then I have lived through the these difficult years 1987,1989,1990,1994,1997,1998,2000-2002,2007-2009, 2011 and now the latter half of 2015 into this year. Given that I am 51, I expect to have to live through another 10-15 such events in the next 30 years. There is perspective.

“I know it when I see it”. – Supreme Court Justice Potter 1964 on obscenity

The one thing I have learned is that we reach a point where stocks get “stupid cheap”. We definitely got there in 2009 when the S&P 500 bottomed at 666.  Since 2009, the end of 2011 qualifies as the last “stupid cheap” period. Currently, the entire market is not “stupid cheap” but sectors within the entire market are stupid cheap. Which ones?

No doubt about it energy and materials are “stupid cheap”. At the top of this story I have posted a recent oil chart so you can see the destruction. A good patch of retail is also”stupid cheap”. What leads me to know we are stupid cheap? When I can buy Bank of America (BAC) for $3 a share or Sirius (SIRI) for $0.80 that is stupid cheap.

The one thing you will learn about reading me is I start with statistics and not with hyperbole. Here are the statistic on year to date returns for 2015. The are pulled from the universe of stocks we follow in Erlanger Chart Room. The other statistics are from the Quantitative Partners database on market statistics.

2015 YTD

Higher 2319 34.27%

Flat           32    0.48%

Lower  4416  65.25%

Now let’s compare 2015 against 2014 and 2013.

Number of Down Days in 2015-2013

2015 132 days

2014 108 days

2013 106 days

Number of Days S&P 500 Fell  >-1% On A Closing Basis

2015 31 days

2014 19 days

2013 16 days

Number of Days S&P 500 Fell  >-2% On A Closing Basis

2015 6  days

2014 5 days

2013 1 days

2012 5 days

The takeaway from these numbers is that 2015 was a very tough year as The Fly has pointed out time and again. 2016 has gotten off to a horrific start as well but will it end that way? Following these statistics will allow us to see subtle changes as they take shape. I remain with a positive outlook on 2016 and feel that the current selloff is going to present itself with major multi year buying opportunities down the road. When?

I do not know. The only thing I know is to follow the bouncing ball and then when the data supports that we are getting there, to cast my line out into the water and prepare for a feeding frenzy.

Buy Low. Sell High.

Over the next couple days I will delve into more statistics on the “sh$% storm” we are living through but for now I am off to enjoy a day off and reflect on the importance of Martin Luther King on all our lives.

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  1. helicopter ben

    I think stupid cheap is only apt for certain things that can’t “expire” so to speak. The s and p 500 only is cheap if you think that the world would never end in a 2008esque fashion, and it didn’t. Oil is stupid cheap because most people realize that the market can’t be flooded forever. To exploit this though, you need something that won’t decay in value over the long term. And as for retail, individual stocks are cheap, until they go bankrupt.

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  2. probucks

    solid synopsis.

    My “buy” list has been made and I too am waiting

    I’d like to see some smarter Fed actin though or VIX to get a big more crazy. I’m smell but don’t see blood in the streets yet.

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