There is NO OTHER REASON to own a stock. Growth??!! What a f*****g joke! Stocks were, at one time, valued as the present value of all their future dividends. Then came the liquidity driven rally of of the 1994 - 2008 period, and the rest was history.
If my Dow 6,000 holds, it will only be for a rally, after which I would be happy to see 5200 hold. If the rally comes, use it to sell. Perhaps I am overly gloomy, but with American households' losing $7 Trillion LAST QUARTER ALONE ($20 Trillion since the recession began) it is hard to see how the $2+ Trillion in government money printing can be terribly inflationary. That would argue for an even stronger US$.
--------------------------------------------
Home prices continue to decline. Prices in China fall for the first time since 2002. World Stock prices fall 7 % last WEEK...
America's five largest banks, which already have received $145 billion in taxpayer bailout dollars, still face potentially catastrophic losses from exotic investments if economic conditions substantially worsen, their latest financial reports show.IF??!! If your Aunt had a frank and some beans, she'd be your Uncle.
If you think people are in a mood to save now, wait till we tell them that their pension fund is under water or has defaulted. It is pretty tough to grow an economy losing $20 Trillion of wealth AND going from ZERO to 10% savings rate.
With the exception of Oil prices, deflationary forces are flowing across the planet - not just the U.S. Ergo, no U.S. stimulus "whateveryouwanttocallit" is going to do anything more than act as airbag in a car traveling at 100 MPH into a brick wall.
My apologies... deflationary depressions make me grumpy.
------------------------------------------------------------------
Despite all of the talk of "getting banks lending again" or "getting credit going again" there is simply NO WAY to re-inflate the U.S. economy in the next 2 or 3 (0r 4) years. None. Zip. Zero. Nada. Bupkis. Ugatz. Not even a little bit. The reason the guys in Washington can't bring themselves to admit this is that it means absolutely, positively that the U.S. banking and financial services sector must SHRINK fairly dramatically over that time frame, and in terms of payroll the sector is our biggest (healthcare is a bigger part of GDP). Just how does a country so dependent upon the export of its financial services industry avoid massive unemployment in the scenario I just drew?
You got me.
And just what are we going to do with a bunch of newly minted suspender wearing, wing tip tapping, hermes tied, bottle service swilling MBA's with $300k in student loans? Think they will be happy going back to school to study Air Conditioning repair at IT Tech?
This ought to be good.
Mentatt (at) yahoo (dot) com
5 comments:
If there are no real dividends, no realisable asset values, and high risk of default, what is a company worth?
If companies are worth almost nothing, what are pension funds or banks worth?
So what will stop the Dow at 5200?
It might not:
http://www.bloomberg.com/apps/news?pid=20601213&sid=aJ5hxhuxW61g&refer=home
Because of the different way the Dow and S&P 500 are measured I think the Dow, as a head line number, will perform better from here because most of its financial issues are already near zero.
I always prefer the S&P 500, but your average investor follows the Dow.
Company's that WISH to survive as public companies will absolutely reorganize themselves around their cash flow, and begin to distribute dividends. That process will absolutely happen.
When and how long will it take? Will the market bottom at 10X earnings or 12X (or worse)?
If I knew that...
Historically 10 or 12x earnings was about the norm, with further adjustment for risk. But that was when investment was just that; putting money into a company long-term because you thought it would be successful in the future.
The trouble is, if you work out the earnings from historic figures, the market for almost everything is still falling so profitability is still falling too. Costs never fall as fast as the markets. Hard to keep up with the game.
But 10x earnings (or less!) doesn't leave much room for 'investment banking'!
I'm no expert, but I'd guess the Dow at around 3,500 before it gathers itself, and then growth of just 3 or 4% per year. I can't see a bounce because there's nothing in the future that could bounce it. Profitability will be elsewhere; China and South America.
I am not as dire as you, but I may prove wrong.
I think this will all come down to how the Oil Export Land Model plays out, and what the various responses are.
In any event, my favorite store of value is farmland.
Love those dividends ...
My favorites ...
LO, MO, PM, RAI (cigarettes)
BPT (Alaskan oil from Prudhoe Bay)
KMP & APU (energy -- master limited partnerships, so watch out with the taxes)
TEG (Chicago natural gas) & T (ATT)
I love cash in hand. Such a joy!
Post a Comment