Is It Time to Bottom Fish?

Excerpts from Dr. Enzio von Pfeil's October 24, 2008, appearance on CNBC Asia:

1. Markets have slid back to negative territory - what's happening?
   • They just keep accepting the reality that the Economic Time™ globally has to get much worse before it can improve.
   • This is what happens when commercial banks stop lending, thereby creating what the Economic Clock™ “calls” an “excess demand for money.”
2. Have markets bottomed out? Is it time to go back in?
   
   • Absolutely not.
   • Banks just don’t want to lend and they won’t lend for a long time.
   • This excess demand for money will keep intensifying the other arm of the Economic Clock, an excess supply of goods.
3. Price and valuations - where do you see viable opportunities?
   • We are not valuation specialists, but when looking at price earnings ratios: the lower “P” may, for now, depress the PE ratio. But, once the “E” tanks, watch the PE ratio rise.
   • The same has to apply to price to book ratios.
4. What about the impact of global recession - how will that pan out and what will be the impact on earnings outlook?
   • It will slam earnings pervasively across the board.
   • The first groups to get hit by this excess supply of goods have to be consumer discretionary, then you will find increasing bankruptcies drive down earnings even of basic, staple industries. Counter-party risk will start making headlines again as in: can the customer even pay?
5. Any topics you'd like to discuss?
   • It is appalling that Wall Street bonuses are being paid out of taxpayers’ money.
   • According to one journalist, “for every dollar of shareholder value that has been destroyed, the employees get paid almost three.”

Comments

[OilyGasMiner:]

Dr. Enzio,

It seems as if the good will continue to suffer for the bad. Ie shareholders for the fat cats.
But what can we do?

We've given them our tax money, with no guidelines for spending. Look at AIG and their squandering.

Warren Buffett has jumped in the market. Is this a good sign for us?

Or is Mr. Buffett so long term, that even if we drop 50% lower it dosen't concern hm?

If we don't go by P/E. What would be a better method to better value stocks to bottom fish?

2008 Oct 23 10:43 AM

[Owen:]

Since November, the US market has lost about $5 Trillion of shareholder value. So based on that anonymous journalist, Wall Street employees received about $15 Trillion in bonuses, or an average of $50 million each--including every junior analyst, assistant broker or floor sweeper. This number is bigger than the US GDP; where did this windfall come from? I guess it's good news, as it means the GDP has doubled.

Does that journalist have basic math skills? For that matter, do you? Last month you advised us to "not be clever". You are clearly following your own advice.

2008 Oct 23 01:41 PM

[User 278265:]

This guy just admitted that he doesn't know how to value the market. That makes this article useless.

2008 Oct 23 01:43 PM

[phdinsuntan...:]

still 300% in 8 years? 80% just shorting financials last 6 months,
any bet?

2008 Oct 23 05:56 PM