|
PureBytes Links
Trading Reference Links
|
M Simms,
I don't find that concept so unusual. The stock market tends to over
discount possible future events in both directions. During the very cyclic
60s and 70s, Nobel Prize winning economist Paul Samuelson said that the
stock market had forecast 11 of the past 6 recessions. On the other side of
the coin, it was very unlikely that the Japanese economy would meet the late
80s expectations reflected by the 100 and 200 price to earnings ratios of
many of their leading stocks even during prosperous times. The result is
that their stock market bubble is still unwinding. It took 25 years for the
DJIA to get back to even after the 1929 peak. In reference to
our NASDAQ and the unwinding of the 2k internet bubble, I quote Karen
Carpenter, "We've only just begun". A good analogy would be to check the
performance of the growth stocks of the late 1920s such as RCA and GM. and
plot their performance for the ensuing 30 years. Yes, given the right
timing one could have made an excellent return buying these stocks, but that
"IF" is the "if" that made all of the difference.
What this means for the next few years is that even if we get a few
boomlets, the stock market is likely to underperform the underylying
economic results. This is due to major forces now coverging that should
cause a major long term contraction of price earnings ratios. These forces
are 1) stock PEs are historically way overpriced despite an 18 month
correction. 2) Major fiscal and eocnomic stimulus is the current only hope
to revive this economy and avert a possible depression. This stimulus isn't
free and will come from borrowing from the future. It will also cause some
inflation if and when there is any economic recovery. The ensuing inflation
will cause further PE contraction because PE ratios are optimized when there
is a very low inflation rate. We can expect an economy more like the late
60s and early 70s for the next few years. After the current recovery, which
I think may have begun last week, we can expect a bigger and deeper
recession which may result in the stock market getting market down to a
median historical level in terms of valuatoin.
So, how does one make money in this enviroment? In order to play the
coming economic recovery, forget about over valued high PE stocks. You will
have to be very selective if you buy stocks and hope to make a good return
on the long side. The best bet currently is to invest in one of the several
very depressed commodities such as Coffee, Cotton, Copper, Soybeans, Sugar,
or Silver. All of these markets could easily appreciate 50% and barely get
back to prices that they were trading 30 year ago. Check it out. Save this
note and check back in February 2002.
Cheers,
Norman
----- Original Message -----
From: "M. Simms" <prosys@xxxxxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Monday, November 12, 2001 3:36 PM
Subject: RE: [RT] Layoff's continue to increase
> Hmmm....attached chart shows the Nikkei average down 70% since 1990.
> I guess their stock market acts independent of their economy then ?
> Wow - that's a first.
>
> > -----Original Message-----
> > From: bruce.larson@xxxxxxxxxxxxx [mailto:bruce.larson@xxxxxxxxxxxxx]
> > Sent: Monday, November 12, 2001 2:14 PM
> > To: realtraders@xxxxxxxxxxxxxxx
> > Subject: Re: [RT] Layoff's continue to increase
> >
> >
> > That's a popular misconception. Japan's gdp growth outstripped that
> > of the US for the first half of the 90s. Real estate did OK in the
> > early 90s as well. Initially, the pain was isolated to the stock
> > market. Yen strength into 1995 which interestingly coincided with
> > the Kobe earthquake and Nick Leeson hit hard. Short-term rates were
> > 3-4% from 1986-89, they were 3-4% in 1992-93. Short rates dipped
> > below 1% after 1995.
> > You know what I also find interesting? Everytime I talk to people I
> > know in Japan, they say its business as usual. Its primarily
> > manufacturing and brokerage that are suffering. Otherwise, Tokyo is
> > bustling. I remember in the go-go 80s these same people said the
> > stock market boom didn't really effect them either. Just made real
> > estate prices sky-high. But they already owned homes and weren't
> > planning on moving so it didn't make any difference. For others,
> > what was then beyond their reach is now affordable. If you leveraged
> > your home and bought more real estate or stocks at the late 80 early
> > 90s mania you're screwed. No different than the Nasdaq mania. If
> > you weren't in it, you never got rich nor poor. Just a sonic boom
> > that rattled the windows. I'm sure if you bought Silicon Valley real
> > estate in the mid-90s, your home has doubled in value. The only
> > people worried are those that bought in the past 2 years.
> >
> >
> > --- In realtraders@xxxx, "M. Simms" <prosys@xxxx> wrote:
> > > Yeah, that's exactly what happened to Japan.....interest rates went
> > to zero,
> > > prices went to near-zero......and they've been in recession for 10
> > YEARS.
> > >
> > >
> > > > -----Original Message-----
> > > > From: bruce.larson@xxxx [mailto:bruce.larson@x...]
> > > > Sent: Monday, November 12, 2001 12:33 PM
> > > > To: realtraders@xxxx
> > > > Subject: Re: [RT] Layoff's continue to increase
> > > >
> > > >
> > > > Sorry but I'm simply astonished at how cheap everything is. The
> > rest
> > > > of the US pumps its gas for 90c-$1.30/gal. We were all
> > incredulous
> > > > the other day that our favorite PapaJohn's pizza is offering 2
> > large
> > > > pizzas for $12.99. I used to pay $15 for one large pizza at
> > > > RoundTable 20 years ago. My wife is going crazy buying clothes
> > > > because they are giving'em away. Everyone in my neighborhood
> > bought
> > > > brand new Mercedes from their 5% cashout refis. Mortgage rates
> > are
> > > > down making everything more affordable, tax rates are going down
> > > > making everything more affordable, airfares appear half price
> > from a
> > > > few months back, zero interest rates and deferred payments on
> > > > everything from cars to computers to furtniture, soon everything
> > will
> > > > be free.
> > > >
> > > > --- In realtraders@xxxx, Ira Tunik <irat@xxxx> wrote:
> > > > > In the bay area a lot of high priced people have been laid off.
> > > > 500 from
> > > > > Medtronics, several hundred from Agilent, and many of the
> > telecom
> > > > companies
> > > > > have folded their tents. Some of the big telecom companies have
> > > > laid off
> > > > > hundreds. Those $700,000 to million dollar homes that where
> > going
> > > > like hot
> > > > > cakes last year might just come back on the market. Even the
> > wine
> > > > industry
> > > > > which is big in Sonoma and Napa counties is taking a hit with
> > > > layoffs. Yet
> > > > > the owners of retail space keep raising the rents, Apartment
> > houses
> > > > have a 2%
> > > > > vacancy factor and their rents keep climbing. Everyone says
> > that
> > > > we are in a
> > > > > deflationary spiral and prices are coming down. Air fares are
> > > > supposed to be
> > > > > a bargain. forget it. Checked on flights to Hawaii, they are
> > twice
> > > > what they
> > > > > were the last time I went just over a year ago. I am wondering
> > > > what good the
> > > > > producer price index is when we import almost everything we use.
> > > > Cloths and
> > > > > shoes from the far east, food and vegetables from South America
> > and
> > > > > Australia, timber from Canada, oil from the middle east,
> > > > electronics from the
> > > > > far east and auto parts from all over. We do produce missiles
> > and
> > > > airplanes
> > > > > here and I am sure that every household has at least two or
> > three
> > > > of each.
> > > > > The made in America symbol means very little. It should read,
> > > > assembled in
> > > > > America, parts made elsewhere. So when you see all those fancy
> > > > numbers, look
> > > > > at the balance of payments and see where your dollars are really
> > > > going. Of
> > > > > course gas prices are back down to $1.75, a real bargain.
> > Medical
> > > > costs are
> > > > > up, health insurance costs are up, dental work costs more,
> > almost
> > > > everything
> > > > > you buy to sustain life is up in cost. Of course you can buy a
> > 2
> > > > MHz
> > > > > computer for under $2000 and that is proof that prices are
> > coming
> > > > down. How
> > > > > many of you buy a computer on a weekly basis? Is it really 0%
> > > > financing on a
> > > > > new car or is the cost hidden in the price? What is truth and
> > what
> > > > is
> > > > > fiction in the numbers that are thrown our way? Could you
> > maintain
> > > > the same
> > > > > life style on last years income or on the income from 5 years
> > ago?
> > > > As the
> > > > > powers say, we haven't had any inflation for the past 5 years.
> > Is
> > > > there any
> > > > > correlation between the governments CPI, PPI and inflation
> > numbers
> > > > and the
> > > > > cost of living. They produce the numbers, we have to pay to
> > live.
> > > > Oh, yes.
> > > > > You did get a tax rebate and immediately went out and bought
> > that
> > > > cabin
> > > > > cruiser you where looking at with all that money the government
> > > > returned to
> > > > > you. Have a good week. Ira.
> > > > >
> > > > >
> > > > > bruce.larson@xxxx wrote:
> > > > >
> > > > > > I've read plenty about hospitality and tourism being hit in
> > Orange
> > > > > > County(Disneyland) where I live. But these are all minimum
> > wage
> > > > jobs
> > > > > > (restaurants, airlines, hotels) where there was a labor
> > shortage
> > > > > > several months back. These aren't people who buy expensive
> > homes
> > > > and
> > > > > > cars.
> > > > > >
> > > > > > --- In realtraders@xxxx, "Me Tarzan" <ibe98765@xxxx> wrote:
> > > > > > > "I, for one, don't personally know anyone who is out of a
> > job"
> > > > > > >
> > > > > > > Consider yourself lucky. I know way too many. With all the
> > > > > > defense
> > > > > > > spending going on, So. CA might not get hot too bad. But
> > IMO,
> > > > the
> > > > > > SF
> > > > > > > Bay area is the harbinger for much of the rest of the
> > country in
> > > > > > this
> > > > > > > regard. We even have a web site for out of work people to
> > get
> > > > > > > together and do other activities <g>
> > > > > > (http://www.recessioncamp.com).
> > > > > > > I'm a few miles from SF Airport where United Airlines has a
> > > > major
> > > > > > > hub. They have laid off a good number of people here. I
> > hear
> > > > that
> > > > > > > In-n-Out burgers has lowered their starting hourly rate from
> > > > $10/hr
> > > > > > > to $8 because their are so many candidates. Hotels are
> > mostly
> > > > less
> > > > > > > than 50% full and are laying off or cutting back the hours
> > of
> > > > > > > workers. Restaurants are cutting staff because people are
> > not
> > > > > > eating
> > > > > > > out as much or spending as much when they do. There are
> > rental
> > > > > > > vacancy signs all over my neighborhood as people without
> > jobs
> > > > have
> > > > > > > either moved in with someone else or left the area.
> > Recruiters
> > > > are
> > > > > > > going out of business left and right, saying businesses are
> > not
> > > > > > > hiring. People are hurting.
> > > > > > >
> > > > > > > As to the unemployment numbers and 5.4% being lower than
> > what
> > > > was
> > > > > > > previously accepted - that was a different time. We've
> > built
> > > > our
> > > > > > > current economy around low unemployment. People expecting
> > to
> > > > > > always
> > > > > > > be able to find work went out on a limb to buy expensive
> > houses,
> > > > > > cars
> > > > > > > and take 2 vacations a year. That drove the economy forward
> > > > across
> > > > > > > all industries. But up here, it generally takes two working
> > > > people
> > > > > > > to even begin to afford a mortgage. What happens when at
> > least
> > > > one
> > > > > > > of those people loses their job? Bad news cascades and not
> > > > only do
> > > > > > > people not by houses and cars, but they cut back on other
> > > > spending
> > > > > > as
> > > > > > > well. Predictions I have seen are for unemployment to hit
> > 6%
> > > > when
> > > > > > it
> > > > > > > the numbers are next reported.
> > > > > > >
> > > > > > > Here's a good economic link with a lot of info on
> > unemployment
> > > > that
> > > > > > I
> > > > > > > recently came across:
> > > > > > > http://www.epinet.org/
> > > > > > > --- In realtraders@xxxx, bruce.larson@xxxx wrote:
> > > > > > > > I've been reading about massive corporate lay-offs esp
> > > > associated
> > > > > > > > with banking mergers for the past 5 years. Seemed
> > everyone
> > > > just
> > > > > > > got
> > > > > > > > a big fat severance package and turned around and got
> > another
> > > > job
> > > > > > > for
> > > > > > > > more money. Otherwise they got rehired as consultants for
> > > > better
> > > > > > > > pay. I suppose the payrolls and claims data are
> > confirming
> > > > the
> > > > > > > > negative news reports for the past several months. But
> > on the
> > > > > > > other
> > > > > > > > hand, a 5.4% unemployment rate is far below the previous
> > 6%
> > > > > > > standard
> > > > > > > > of NAIRU(non-accelerating inflationary rate of
> > unemployemnt)
> > > > > > > commonly
> > > > > > > > accepted in the early 90s. I, for one, don't personally
> > know
> > > > > > > anyone
> > > > > > > > who is out of a job. Aside from some furniture chain
> > store
> > > > > > > closures,
> > > > > > > > I really don't see much evidence of a slowdown out here in
> > > > > > southern
> > > > > > > > California...yet.
> > > > > > > >
> > > > > > > >
> > > > > > > > --- In realtraders@xxxx, "Norman Winski" <nwinski@xxxx>
> > wrote:
> > > > > > > > > Me,
> > > > > > > > >
> > > > > > > > > I am forecasting a better than expected holiday
> > shopping
> > > > > > > > > season. The US economiy bottomed last week. You will
> > hear
> > > > about
> > > > > > > > > it in February.
> > > > > > > > >
> > > > > > > > > Cheers,
> > > > > > > > >
> > > > > > > > > Norman
> > > > > > > > >
> > > > > > > > > ----- Original Message -----
> > > > > > > > > From: "Me Tarzan" <ibe98765@xxxx>
> > > > > > > > > To: <realtraders@xxxx>
> > > > > > > > > Sent: Saturday, November 10, 2001 1:50 AM
> > > > > > > > > Subject: [RT] Layoff's continue to increase
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > > Each layoff likely removes one more shopper for the
> > Xmas
> > > > > > > season...
> > > > > > > > > >
> > > > > > > > > > http://www.msnbc.com/news/555872.asp?cp1=1
> > > > > > > > > >
> > > > > > > > > >
> > > > > > > > > >
> > > > > > > > > > To unsubscribe from this group, send an email to:
> > > > > > > > > > realtraders-unsubscribe@xxxx
> > > > > > > > > >
> > > > > > > > > >
> > > > > > > > > >
> > > > > > > > > > Your use of Yahoo! Groups is subject to
> > > > > > > > http://docs.yahoo.com/info/terms/
> > > > > > > > > >
> > > > > > > > > >
> > > > > >
> > > > > > To unsubscribe from this group, send an email to:
> > > > > > realtraders-unsubscribe@xxxx
> > > > > >
> > > > > >
> > > > > >
> > > > > > Your use of Yahoo! Groups is subject to
> > > > http://docs.yahoo.com/info/terms/
> > > >
> > > >
> > > >
> > > > To unsubscribe from this group, send an email to:
> > > > realtraders-unsubscribe@xxxx
> > > >
> > > >
> > > >
> > > > Your use of Yahoo! Groups is subject to
> > http://docs.yahoo.com/info/terms/
> > > >
> > > >
> >
> >
> > To unsubscribe from this group, send an email to:
> > realtraders-unsubscribe@xxxxxxxxxxxxxxx
> >
> >
> >
> > Your use of Yahoo! Groups is subject to
http://docs.yahoo.com/info/terms/
> >
> >
>
>
>
----------------------------------------------------------------------------
----
>
>
> To unsubscribe from this group, send an email to:
> realtraders-unsubscribe@xxxxxxxxxxxxxxx
>
>
>
> Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
>
>
To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
|