Wednesday, December 21, 2011

What Stock Market Multiples Say About "Growth"

Many energy watchers in the blogsphere often talk about "the end of growth". IF, and its a big IF, they are correct, you will see it first in the stock market.

The stock market prices in future growth and current cash flow/earnings (no, they are not the same thing). If there is no "growth", PE multiples will (IMHO) contract down deep into the single digits.

So it was with great interest that I saw this article today on Marketwatch.

If the end of growth is here, temporarily or permanently, you will see it in market multiple contraction.


Read this interesting article about the end of the 9-5 workday at the office.

Without doubt this is happening... it is the conclusion as to "why" the author reaches that I must take to task.

Vehicle Miles Traveled is down... Oil imports are down in the U.S., as is total Oil consumption... Oil is primarily a transportation fuel in the U.S... what choice do people, or companies for that matter, have? Commuting is going to contract. PERIOD. As it does the value of all of that commercial office space, and the support business surrounding it (from lunch trucks to dry cleaners) is going to go down like a rock in a pound. Think banks are in bad shape now? They are positively healthy and robust compared to what they will be with a 10% contraction in transportation fuels.


I wish these "young farmers" good luck.

Unfortunately, for them to make a living farming at the sub-industrial level will require the price of their produce to rise substantially. I speak with local organic/family farm types fairly often at our local Farmer's Coop and at the farmer's markets in the area... and they just aren't making it. Food is CHEAP and still 1 in 7 Americans cannot afford food on their own income and require government assistance... and its far WORSE in the rural heartland, where people are taking a stab at this, with 1 in 5 on food assistance here in my rural Tennessee county. There is a vicious cycle going on here... the government subsidizes people's food budget, giving them little incentive to buy local products from people that do not and cannot accept Food Stamps... and by subsidizing people the people do not learn how to grow and preserve food, even though in our local there is an excess of land and rain. The elderly farmer up the street from me told me that when he was a young man most everyone kept hogs here... now almost no one does. Those that do send their hogs out for "processing", and by doing so pretty much eliminate the economic advantage of raising the hog in the first place (by paying $.70 per pound in processing fees instead of doing it themselves).  We slaughter several hogs each year and save a couple $thousand$ per year in doing so.

Yet the small scale farmers around here are having a hard time selling their produce and livestock. The government has removed the incentive and tradition of self-reliance from the descendants of America's frontiersmen and farmers, and in doing so left the farmers and their potential customers in poor shape.


Anti-trade socialists should read this article.

Enough said.


American Family Life continues to just get weirder and weirder.


More soon.

1 comment:

tweell said...

How much longer will the US government keep the bread and circuses coming before the money they print becomes worthless? At that point, having a farm already running makes a lot of sense to me (and to you, obviously). We'll need many times these folks working on farms to compensate for the loss of cheap energy, at least in the long run.