4 Good Value Stocks Nearing Buy Territory [View article]
I also like oil companies, and though I own a little XOM, find it too pricey relative to RD, BP, TOT, E.
XOM pays low dividends to shareholders, and plow cash into stock buy-backs instead. The buy-backs give a paltry return to shareholders, and a super-sized return (100's of millions) to the value of their executives' stock options. Questionnable corporate governance, treating owners (aka shareholders) as second class citizens, and executives as royalty.
Wall Street Breakfast: Must-Know News [View article]
Almost a footnote at the end of the page: "Georgia-based Southern Community Bank's closure will cost the FDIC $114M. North Carolina-based Cooperative Bank's closure will cost the FDIC $217M. Kansas-based First National Bank of Anthony's closure will cost the FDIC $32.2M."
These add up to roughly $365m, which is roughly the cost to the taxpayers of the entire real estate crash of the late 1980's.
In other words, the total cost to the taxpayers of the previous, disastrous real estate crash of twenty years ago is now treated as a minor footnote, repeated on a weekly basis, and almost unnoticed. Last time, fraudulent bankers were led in chains by the FBI, and this time they are getting bonuses. Is this the "change we can believe in" ?
S&P 500 Watch: March 'Winners' Are Actually the Biggest Losers [View article]
Thanks for an informative analysis. When the market was near its lows I had argued that sound stocks were by no means "cheap"; and that the low SP500 was more due to some of its constituents being demolished, rather than due to its good companies becoming "cheap". This was just an observation, now bolstered by your excellent analysis, which says that the demolished ones have stirred back to life in the ER, boosting the SP500.
I still maintain that at current levels stocks are not "cheap" except relative to the bubble era. Dividends are being slashed at astonsihing rates, and historically, companies which drastically cut dividends have restored them slowly, if at all. Thus, I expect SP500 dividends will not climb back to 2007 levels for many years, and this suggests to me that stocks will be worth less than they were in 2007 for many years as well.
I am glad you have turned optimistic because your opportunity range of 6500-6800 on the dow has arrived. I certainly agree that there are good values in many stocks, but many still are overvalued, and I suspect that the current general levels of the markets (+/-25%) will be with us for some years, as they are closer to normal levels than the irrational exuberance that began in the mid-90's.
I must respectfully take issue with some of your points, as shown below:
One: Economic fundamentals are a lot worse than you hear. Productive activity has been reduced, and replaced by frothy paper shuffling over the past two decades. Americans are still creatures of excessive optimism, not necessarily warranted by facts.
Two: "Geithner will ride to the rescue", but all he can do is create inflation, and further distort the economy by having the productive subsidize the unproductive.
Three: Obama will constrain American ingenuity, with punitive taxes on successful entrepreneurs.
Four: "General Electric is not dead" - Agreed!
Five: "The market will rise, and fast". If it does, it will only be to fall again. The current general levels (+/- 25%) are consistent with pre-bubbles history and with rational metrics and realistic economic expectations. The notion that we shall shoot back to bubble levels soon and fast is doubtful.
13 Safe Stocks in a Return to the 1970s [View article]
Great article.
I suspect I may be a bit younger than your Dad, but I do remember the notion of "risk premium" that has been rendered quaint in the era of the Great Bubbles. This states that since stocks had higher risk than bonds, their return based on their earnings, of which a reasonable proportion was expected to be paid out as dividends, should exceed that of bonds.
In the era of the Great Bubbles, the notion of "risk premium" was replaced by the notion of the "greater fool", i.e., that someone will always be willing to pay you more for a stock, even if its earnings are miniscule and its dividend is nil. After all they say that "a sucker is born every day".
I agree that quaint notions like "risk premium" are back in vogue, as we are running out of "greater fools".
Short-term bounce on great oration, perhaps, but not even guaranteed to offset all the fundamental problems.
Longer-term, for most of 2009 in my opinion, investors will increasingly fret over the pace of layoffs, drops in earnings, and slowdown in all manner of economic activity, both domestically and globally.
Consumers are satiated, and so I doubt demand will be rekindled, no matter how much the government tries to coax people into borrowing to keep overconsuming goods and services that they now recognize they didn't even need in the first place.
4 Good Value Stocks Nearing Buy Territory [View article]
XOM pays low dividends to shareholders, and plow cash into stock buy-backs instead. The buy-backs give a paltry return to shareholders, and a super-sized return (100's of millions) to the value of their executives' stock options. Questionnable corporate governance, treating owners (aka shareholders) as second class citizens, and executives as royalty.
Wall Street Breakfast: Must-Know News [View article]
These add up to roughly $365m, which is roughly the cost to the taxpayers of the entire real estate crash of the late 1980's.
In other words, the total cost to the taxpayers of the previous, disastrous real estate crash of twenty years ago is now treated as a minor footnote, repeated on a weekly basis, and almost unnoticed. Last time, fraudulent bankers were led in chains by the FBI, and this time they are getting bonuses. Is this the "change we can believe in" ?
S&P 500 Watch: March 'Winners' Are Actually the Biggest Losers [View article]
I still maintain that at current levels stocks are not "cheap" except relative to the bubble era. Dividends are being slashed at astonsihing rates, and historically, companies which drastically cut dividends have restored them slowly, if at all. Thus, I expect SP500 dividends will not climb back to 2007 levels for many years, and this suggests to me that stocks will be worth less than they were in 2007 for many years as well.
Five Predictions for This Market [View article]
I must respectfully take issue with some of your points, as shown below:
One: Economic fundamentals are a lot worse than you hear. Productive activity has been reduced, and replaced by frothy paper shuffling over the past two decades. Americans are still creatures of excessive optimism, not necessarily warranted by facts.
Two: "Geithner will ride to the rescue", but all he can do is create inflation, and further distort the economy by having the productive subsidize the unproductive.
Three: Obama will constrain American ingenuity, with punitive taxes on successful entrepreneurs.
Four: "General Electric is not dead" - Agreed!
Five: "The market will rise, and fast". If it does, it will only be to fall again. The current general levels (+/- 25%) are consistent with pre-bubbles history and with rational metrics and realistic economic expectations. The notion that we shall shoot back to bubble levels soon and fast is doubtful.
13 Safe Stocks in a Return to the 1970s [View article]
I suspect I may be a bit younger than your Dad, but I do remember the notion of "risk premium" that has been rendered quaint in the era of the Great Bubbles. This states that since stocks had higher risk than bonds, their return based on their earnings, of which a reasonable proportion was expected to be paid out as dividends, should exceed that of bonds.
In the era of the Great Bubbles, the notion of "risk premium" was replaced by the notion of the "greater fool", i.e., that someone will always be willing to pay you more for a stock, even if its earnings are miniscule and its dividend is nil. After all they say that "a sucker is born every day".
I agree that quaint notions like "risk premium" are back in vogue, as we are running out of "greater fools".
The Bull Run Begins This Week [View article]
Longer-term, for most of 2009 in my opinion, investors will increasingly fret over the pace of layoffs, drops in earnings, and slowdown in all manner of economic activity, both domestically and globally.
Consumers are satiated, and so I doubt demand will be rekindled, no matter how much the government tries to coax people into borrowing to keep overconsuming goods and services that they now recognize they didn't even need in the first place.