The Good: Earnings are up.
As Doug Kass detailed Wednesday morning (with what appears to be some great timing), this may be reason to believe that stocks have hit bottom for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 year:
Trading at around 11 times earnings, stocks are fairly inexpensive, says Kass. He notes stocks generally trade at around 15 times future earnings, and even higher in periods of tame inflation and low interest rates, as we're currently experiencing.Racá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r than P/E ratio, below is E/P (i.e. earnings yield) of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 S&P 500 going back 100 years (note that earnings yield appears to be at a 20 year high).
The Bad: Earnings are up.
The important question is how cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365se earnings have come about. We all know that recent earnings have ratcheted higher due to reduced costs (job cuts, lack of investment, cheap financing) racá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r than top line growth. In ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r words, executives for public firms have caught up with cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 "buy, strip, and flip" nature of private investors. Yves Smith and Rob Parenteau detail cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 impact on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 "actual" economy:
The big culprit in America is that public companies are obsessed with quarterly earnings. Investing in future growth often reduces profits short term. The enterprise has to spend money, say on additional staff or extra marketing, before any new revenues come in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 door. And for bolder initiatives like developing new products, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 up front costs can be considerable (marketing research, product design, prototype development, legal expenses associated with patents, lining up contractors). Thus a fall in business investment short circuits a major driver of growth in capitalist economies.And a similar story from cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Chicago Tribune, Corporate Spending Good for Economy, but Bad for Profits, with a focus on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 analyst community.
But even optimistic analysts, those who have ruled out a double-dip recession and see growth continuing at a modest pace, are wary. Some are raising concerns that companies will fall short on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 profits investors are expecting, and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y think cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 recent sell-off in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 market comes from investors afraid to wait.Source: S&P / Irrational Exuberance
The cautious stance is not merely a symptom of global economic worries. Racá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r, some analysts contend that companies now must spend more money if cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y are to increase profits at levels that will satisfy investors. Yet, if cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y are spending more, and a weak economy stifles sales, that spending could backfire, leaving companies with disappointing profits and disappointed investors.
I have an idea why business won't invest. We have a president and congress who are not business friendly. Businesses won't spend money if cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y can't be reasonably sure of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 return. Take energy utility companies for example. Sitting on cash at 0% is way better than investing it in some project that may not be profitable if cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 cap and trade proposal (apparently next on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 presidential to do list after legalizing illegal immigration) becomes reality. Steve Wynn would racá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r build in Macau than cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 US, all else equal since cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 political climate toward business is better. Yikes.
ReplyDeleteJake - your 100 year S&P500 E/P chart would be even more interesting if you also showed *real* stock yield (against some inflation metric), or subtract out an investment grade spread. One could argue that a lot of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 difference in E/P over time is due to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 base interest rate at cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 time.
ReplyDeleteanon- are you inferring that under cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 last president our economy blossomed? i just want to make sure i'm dealing with someone who is as opinionated towards actual failed policy as cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365oretically failed policy.
ReplyDeletesteve- trying to think how we can show this. implied future inflation is embedded within cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 10 year yield, so we can use that (forward inflation figures are relatively new).
ReplyDeleteBest quote on this:
ReplyDelete"Geithner's strategy, if you can call it that, reminds us of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 shallow management pretense visible in many Wall Street firms. The Chinese and Russians see cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365mselves in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 ascendancy and, unlike cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S., cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365se nations have a vision of where cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y want to be a century from now. Americans just want to borrow more money."
Good note on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 20-year high. So basically, we are just expecting lower P/Es as cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 decades pass...
ReplyDeleteAnonymous is right, Jake. Uncertainty is cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 enemy of business investment.
ReplyDeleteBusiness owners/managers are asking: "Twelve months from now...
-"what is Obamacare going to cost me?"
-"what is my tax rate going to be (i.e. will cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Bush tax cuts be extended)?"
-"will I be slapped with a large carbon tax and how will that impact my bottom line?"
-"will electricity rates necessarily skyrocket (BHO's words-not mine) due to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 EPA's threat to back-door regulate CO2?"
-"will by shop be unionized through Card Check, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365reby increasing my labor costs?"
I am a business owner and I would go one step furcá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r than Anonymous. This President and Congress are actually HOSTILE to business.
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