According to the chart, everyone should’ve stayed out since last fall
You know how it is. It’s nice to know, but this doesn’t help me trade.
Hope this helps someone make a decision re: investing though.
I’d like to buy SPY but not with P/E like that.
ducati998, 17. April 2009, 0:53
Kat,
That P/E is the current P/E…which due to the collapse in earnings, and current rally computes out
If however you take 10 year trailing aggregate earnings, and recalculate, then, it is lower.
If you believe earnings will recover to at least their average…then you buy.
This is why stockmarkets anticipate earnings recoveries, it’s a reversion to the mean trade.
jog on
duc
Comp!ete, 17. April 2009, 18:01
Good points Duc, but……
Who believes that corporate earnings will return to what they were in recent years?
I’ve been out shopping lately and I still see only sparse activity at best. I live in an affluent area. The major city that I live near has a massive budget deficit due to reduced sales tax receipts.
Most Americans are now worried that they will lose their jobs.
Those anecdotes don’t build confidence in an earnings Renaissance any time soon.
One last note; At least where I live, the “Stimulus” money is being used to keep public pension obligations from default. Not exactly the bricks and mortar re-building of America that everyone was promised. The “Stimulus” dollars are also being used to fund social programs.
ducati998, 17. April 2009, 18:22
Kat,
Well, mainly due to inflation being government policy. As earnings levitate due to inflation, asset prices also rise, at about the same rate as your purchasing power shrinks.
Now, should you get inflation, without a collapse in the dollar, as we had 1995-2000, then you have conditions for a massive bubble…again.
Forget what the “public” thinks…they are clueless.
I’ll respond to both of you tomorrow when I’m able to think.
Comp!ete, 17. April 2009, 22:15
You can inflate your fiat currency all you want, but people without jobs only buy necessities. Not Ipods, Harleys, flat screens, laptops, gadgets du-jour. They don’t eat out either.
Comp!ete, 17. April 2009, 22:19
The 2nd largest Mall management company in America just filed for bankruptcy. I don’t know how inflation will help the malls. People are there, but they aren’t buying anything.
ducati998, 17. April 2009, 22:26
Kat,
Ahh yes, how negligent of me.
Complete,
Apologies for confusing you with Kat.
Inflation within commodities prices can occur certainly without the participation of the unemployed.
The reason for this, and why inflation takes time to become apparent is that inflation always starts at the top of the pyramid, with those who have early access to the new money.
As they spend, their purchasing power is initially increased, as general price levels do not reflect the effects of the expanded money supply.
The further down it trickles, the greater the visability of a growing inflation.
By the time it reaches the unemployed, they receive none of the early benefits, and the full-force of the problems.
Unless Bernanke, who is aware of the problem, can drain the money supply, before inflation takes hold, while simultaneously not choking off any recovery, then all will be fine.
jog on
duc
Comp!ete, 17. April 2009, 22:56
It’s not just the unemployed that we are talking about Duc. Even affluent Americans aren’t spending in the U.S. Producers can inflate their cost for goods all they like, if there is no demand, there are no earnings.
ducati998, 17. April 2009, 23:09
Complete,
Sure, and many products and services will see impacted earnings.
However, can you stop spending on mortgage/rent, food, clothes, heating/cooling, petrol?
I know I can’t, and it is the providers of those goods/services that will adjust their prices to inflation, and not suffer a major dislocation in demand.
The message is, you need to be selective in your stock picks.
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That’s an awful chart. It looks like it is time to “Hit the exits”.
It would make no sense now to chase this rally that is about to lose steam fast.
According to the chart, everyone should’ve stayed out since last fall
You know how it is. It’s nice to know, but this doesn’t help me trade.
Hope this helps someone make a decision re: investing though.
I’d like to buy SPY but not with P/E like that.
Kat,
That P/E is the current P/E…which due to the collapse in earnings, and current rally computes out
If however you take 10 year trailing aggregate earnings, and recalculate, then, it is lower.
If you believe earnings will recover to at least their average…then you buy.
This is why stockmarkets anticipate earnings recoveries, it’s a reversion to the mean trade.
jog on
duc
Good points Duc, but……
Who believes that corporate earnings will return to what they were in recent years?
I’ve been out shopping lately and I still see only sparse activity at best. I live in an affluent area. The major city that I live near has a massive budget deficit due to reduced sales tax receipts.
Most Americans are now worried that they will lose their jobs.
Those anecdotes don’t build confidence in an earnings Renaissance any time soon.
One last note; At least where I live, the “Stimulus” money is being used to keep public pension obligations from default. Not exactly the bricks and mortar re-building of America that everyone was promised. The “Stimulus” dollars are also being used to fund social programs.
Kat,
Well, mainly due to inflation being government policy. As earnings levitate due to inflation, asset prices also rise, at about the same rate as your purchasing power shrinks.
Now, should you get inflation, without a collapse in the dollar, as we had 1995-2000, then you have conditions for a massive bubble…again.
Forget what the “public” thinks…they are clueless.
jog on
duc
Duc,
that’s not my comment above, just FYI.
I’ll respond to both of you tomorrow when I’m able to think.
You can inflate your fiat currency all you want, but people without jobs only buy necessities. Not Ipods, Harleys, flat screens, laptops, gadgets du-jour. They don’t eat out either.
The 2nd largest Mall management company in America just filed for bankruptcy. I don’t know how inflation will help the malls. People are there, but they aren’t buying anything.
Kat,
Ahh yes, how negligent of me.
Complete,
Apologies for confusing you with Kat.
Inflation within commodities prices can occur certainly without the participation of the unemployed.
The reason for this, and why inflation takes time to become apparent is that inflation always starts at the top of the pyramid, with those who have early access to the new money.
As they spend, their purchasing power is initially increased, as general price levels do not reflect the effects of the expanded money supply.
The further down it trickles, the greater the visability of a growing inflation.
By the time it reaches the unemployed, they receive none of the early benefits, and the full-force of the problems.
Unless Bernanke, who is aware of the problem, can drain the money supply, before inflation takes hold, while simultaneously not choking off any recovery, then all will be fine.
jog on
duc
It’s not just the unemployed that we are talking about Duc. Even affluent Americans aren’t spending in the U.S. Producers can inflate their cost for goods all they like, if there is no demand, there are no earnings.
Complete,
Sure, and many products and services will see impacted earnings.
However, can you stop spending on mortgage/rent, food, clothes, heating/cooling, petrol?
I know I can’t, and it is the providers of those goods/services that will adjust their prices to inflation, and not suffer a major dislocation in demand.
The message is, you need to be selective in your stock picks.
jog on
duc