Barron's Calls a Bottom

Barron's cover story this weekend basically calls a bottom to the bear, though not in quite so many words.

Sure, stocks could slide much further -- but they probably won't. By most measures, they are downright cheap.

After blaming Obama for much of stock market woes ("The lousy economy is the main factor, but stocks haven't been helped by Obama administration proposals ... It doesn't help that the Street is calling this an "Obama bear market" and that some investors are looking to "Obama-proof" their portfolios...), Barron's concedes that the president did get at least one thing right: stocks are cheap for investors with patience.

Barron's says its research bears that out. Here's why:

1. Stocks are cheap relative to P/E - a Citigroup economist's 2009 earnings estimate for S&P 500 components puts their collective P/E ratio at more than 13, which is where a bunch of bear markets bottomed - except 1974, '82 and '87 when P/E went as low as 8.5. If we get down to 10, S&P could fall another 25% to 500 and DJIA around 5,000. But that probably won't happen, because in previous downturns Treasury yields were much higher, and because another Citigroup analyst says he's seeing signs of panic.
2. Stocks are cheap relative to GDP - at 60% of the $14T GDP, stocks are their cheapest relative to economic output since the early '90s. But they're still well higher than the lows of about 30-35% seen in the '70s and early '80s. Stocks are also cheap relative to book value - about 1.3 down from a high of 5 during the dot-com bubble.
3. Stocks are cheap relative to gold - S&P 500 is now worth about 75% of the price of an ounce, vs. a peak of more than 5x in 2000. Over the past 40 years, the average stocks-to-gold ratio has been 1.6.

There's also a lot of cash on the sidelines, Barron's says, noting money-market funds now hold $4T - almost half of the market cap of U.S. stocks, and double the amount in money-market funds two years ago.

Barron's expects stocks in defensive industries like drugs (PFE, LLY, MRK, BMY, SGP) and consumer goods (HNZ, KFT, PG, KO, GIS) to benefit from a return of confidence.

:::::::::::::::::::::::::::::::::::::

For those prone to bottom calling, or not, here's some more food for thought:

• Babak notes pessimism, as measured by the American Association of Individual Investors' weekly survey, is at record highs. A contrarian buy signal.
• Todd Sullivan says that a couple weeks of positive economic data could cause extreme pessimism to make a rapid about-face.
• Jason Schwartz thinks we're in another bubble - one of uncertainty. Forget about buy-and-hold, he says - but short term gains on oversold stocks could be massive.
• Meanwhile Mike Stathis, while noting stocks are very close to "fair value," for what that's worth, doesn't mean the market won't go lower. In fact, it probably will.

Comments

[Glen Bradford:]

Barron's is probably a little bit early on this one. But, who knows for sure. Stocks are cheap. Your average investor doesn't know how to price companies, so who cares? Welcome to short term game theory.

Mar 08 07:10 PM

[johnny inca:]

it's not a bad time to guess. Some of the prices are insane. The perpetual securities of AEGON are trading at 12 cents on the dollar. Look at AEH, it is yielding 50%. I am not making this up.

I know things can always get worse, but, really?

Mar 08 07:22 PM

[Ohrama:]

This may or may not be the bottom (markets don't go up or down monotonically, but is like a under-damped system, of course more complex nonlinear and time-varying, that keeps oscillating), but all the reasons given can be challenged easily:
1. This is not 74, 82 or 87 to use the PEs from those times. During those times, the country was relatively affluent (was it 1982 when we moved from most prosperous nation to the net debtor nation status?), had better industrial and man-power base and very little outside competition. Now a majority of us seems to be working in retail, hamburger flipping or serving coffee, housing and related activities (how many times your house title got verified or insured or paid closing costs and real estate agent commissions?) and health-care, none of which adds to true wealth that could be sold to outsiders.
2. The stock market might be cheaper with respect to the GDP, but a big chunk of it on useless work (you polish my shoe and I will polish yourself and both get paid. Perhaps I should not put this in writing and give new idea for the politicians to get extra tax - We should calculate the efforts by the housewives or husbands who work at home in terms of managing the house and bringing up the children, attach the proper cost to their efforts, and add it to our GDP!) and due to politicians with a law education (and who can't understand real manufacturing or economics) dictating that thou shall be paid a minimum of $8.00 per hour along with all the fringe benefits.
3. Gold is higher with respect to the stock market perhaps because folks realize that a) we might not go back to the mass production (that reduces cost and increases profits) and consumption binge that we were in during the last 25 years, b) the politicians want to avoid pain when it is due (they did not want to interfere in the market when the bubbles were developing and everyone went on an orgy), and c) the enormous printing of paper money that is taking place (many argue that since so much money is lost, this is fine. But this makes the assumption that the rest of the world would be foolish for ever to trade their real goods of hard labor for our paper).
I will be personally happy if we can recover from this mess and avoid a possible civil unrest (it is always easy to accept going from poverty to richness, but the reverse is not). As a professor of engineering, I tell my students that perhaps the 1970-2000 was the golden period of this country and they got to work their butts off so that their children when they grow up can talk of a similar period in the future. Perhaps I am wrong and we all can have a good time doing the easy things.

Mar 08 07:54 PM

[roadsailor:]

I sure wish all these analysts and journalists predicting the future of the markets and economy would just shut up. As is written in almost every prospectus and market document, "past performance is not always indicative of future performance." This is true today more so than ever before in this country. So lets quit making judgements based on the past. The world will never be the same again, much less the United States. We have reached a major paradyne shift in political and economic foundations in this country, and know one knows what will happen from here forward. All we really feel inside is that America will never return to what she once was, and to many, especially the young, that should be really scary. So journalists and analysts lets just cut with making copy for the sake of copy, and rationalize about something more relevant. The economy and markets, we must "wing it from here"

Mar 08 09:19 PM

[User 354104:]

"Paradyne Shift"??

Please... You need to at least use the correct word, which is "paradigm", if you are trying to sound even remotely intelligent.

Mar 08 09:29 PM

[roadsailor:]

At least u got the point


On Mar 08 09:29 PM User 354104 wrote:

> "Paradyne Shift"??
>
> Please... You need to at least use the correct word, which is "paradigm",
> if you are trying to sound even remotely intelligent.

Mar 08 09:35 PM

[Michael_Cohen:]

Barron's is pretty solid as a contrarian indicator. Looks like S&P 550 or lower here we come.

Mar 08 09:38 PM

[dawase@gmai...:]

I'm bemused by individual investor psychology a lot these days. People were buying stocks hand over fist last year at 15k, but are now selling at 6.5k. I'm not suggesting there aren't problems, because obviously there are. However, the world is not going to end despite what a few people believe. All I know is that you don't get rich buying high and selling low. Quite the opposite.

I've heard "it's different this time because it's global." Yes, that's true, but the response is equally global. Central banks and governments around the world are providing liquidity and stimuli like there's no tomorrow. At the least, this will cushion the landing.

At the end of the day, your emotional responses are your worst enemy when investing. Volatility invokes your fight or flight response unless you've trained yourself.

Is now a good time to keep extra cash ready? Yes.
Is it also a good time to increase your equity purchases or shift some allocation from fixed income to equities? Yes (assuming your time horizon is sufficiently long). Am I suggesting putting on full positions? No, of course not.

Inflation will return. You can bank on it. I don't know when exactly, but at some point this coordinated global effort will inflate prices if the Chinese don't do it all on their own with their $1.8T in reserves.

I started nibbling on the long side last week after sitting largely in cash since October. Names I picked up included DELL ($4/sh in cash, virtually no debt, $1.25ttm EPS, so even if earnings fall by 50% its less than 7x net of cash), EMC (also about 7x net of cash, with high earnings visibility from its recurring contracts), GE (Sold @ $24 & $13, believe the CDS volume doesn't even come close to suggesting the kind of trouble priced into the stock, happy to invest at a discount to BRK), UYG (long @ 1.7, believe the upside potential is several multiples if not a magnitude greater than the downside, compare that profile with SKF). I also added a little LQD and JNK to reduce my overall cash position. Other names I'm watching include WMI, KO, K, PHO, FXC.

On top of the fact that everyone thinks the world is coming to an end, I think the newsflow this week will be positive with 1. Madoff potentially pleading out, 2. a potential moderation of mark-to-market accounting, 3. maybe more discussion of bringing back the uptick rule. With all this said, I am fully prepared to buy another round of equity if the market falls to 5000. In fact, I would welcome the opportunity. It is in the darkest days when fortunes are made and lost.

Mar 08 09:42 PM

[DRH:]

I really have no idea why people insist on going out on a limb trying to call bottoms.

I've heard lots of great arguments for why stocks can't get much lower. The points made in this article are, for the most part, reasonable. However, when people are behaving irrationally there's just no limit to what might happen.

Mar 08 10:40 PM

[ziggysellsb...:]

If e.g. Citibank is nationalized and the current stockholders get zip!, and the execs get paid out and the government runs it for say 6 months followed by reissuing common stock and selling that to the public at large for a pretty penny, how is that fair to the existing stockholders? And what kind of a deal is it for the new stock purchasers? The whole thing doesn't make any sense to me... anybody got some sense of what's fair to all parties concerned?
ziggy

Mar 08 10:54 PM

[Donald Johnson:]

Tomorrow's WSJ says 5000 is possible on the Dow, corporate bonds are coming down while interest rates are rising and 13% unemployment is in the cards, if not already here.

Investors are calling this the Obama Bear Market and have been since summer because the president thinks "profit ratios and earnings ratios" are different.

We have a president who doesn't listen to the markets any more than the professional money managers who helped create this mess.

The prospects of higher taxes, soaring deficits and Obama's clueless clique blowing it has smart investors scared out of their skins.

That GM, GE, Citi, BAC and other institutions are in so much trouble is feeding the panic peddlers. We're all panic peddlers. The market is a panic peddler. And everybody in the world but the Obama clique are listening.

Until Obama and his team get it, we're going to continue losing it.

Mar 08 11:11 PM

[Moon Kil Woong:]

I wonder flipping through old articles in Barrons how often they have said the bottom was near or stocks were cheap. If I recall correctly I saw such an article a couple times and I don't even subscribe to it. So I seldom read it.

If they were so good at predicting the market they'd be investing their own insane wealth, not running an increasingly archaic newsprint business.

Constructe now Moon Kil Woon

Mar 08 11:13 PM

[JKA:]

This is all to do with confidence. Blame it on Bush, Obama, short sellers, banks, all of us for speculating on property... Yes, we are all to blame.
Stop looking at the past to predict the future. This event is in no way like any in the past, only may be the thirties as the cause of both was excessive leverage.
It is really absurd that these financial gurus constantly look at their past charts to predict the future. The basic investment warning is that past is no indicative of future, but yet we are bombarded with all this goobledegook (sorry if spelled incorrectly).

The blaming and all this cheap prediction does not reverse the course. What is needed is swift actions by the government in all areas to restore confidence. Getting people to work is by far the most important single factor to restore confidence.

Forget about banks being too big to fail nonsense and stop pouring money into these bottomless parasites. Let them fail. If there's money to be made in the areas they operate, surely their "vacuum" will be filled by current and new participants - after all did anyone compensate you for the money you lost on your stocks? Aren't all of us together much larger than anyone entity to fail?

Lack of confidence as measured by various indices indicates the market may very well turn lower and unless there is massive selling and huge exodus, the contrarians won't be coming on to take advantage.

Mar 08 11:19 PM

[ejhickey:]

Fact : the DJIA rose under FDR by 48% during his first 8 weeks in office. The DJIA has fallen about 20% since inauguration day. So far Obama is looking more like Hoover than FDR.

Mar 08 11:24 PM

[Maxoneout:]

The major problem as some have said, is markets do not move to equilibrum following 'crashes'. We have major systemic failures, thats obvious. What topic Barrons should have focused more on was the phycological fiancial behavior following these 'crashes' as a clue to whats in store--SO VERY EARLY, in the 'recovery' game!

Mar 08 11:26 PM

[mariocavolo:]

I'm so happy Barron's calls a bottom.....now I know much more likely to stay short a while longer....

Mar 08 11:44 PM

[No Free Cake:]

Looks to me like Barron's is really reaching to find stats that show stocks are cheap. S&P is forecasting 2010 As Reported earnings for the 500 at about $40 which puts the P/E for the index around 17-18. Hardly cheap, arguably expensive.

PS: The 2009 forecast is so abysmal I"m ignoring it.

Mar 08 11:48 PM

[mr clark:]

know the one i liked was in '06 or '07 barrons had a big coverstory on GE, saying it was undervalued at mid $30 and could see $50... stay away from their picks jmho

Mar 08 11:50 PM

[TKO:]

We might be going into a bigger dip then we anticipate. But considering most of the global stimulus packages will not be taking effect until 2010, perhaps we need to start thinking slightly ahead and wonder -- what if we grossly overshoot the stimulus requirement in 2010?

What we might be seeing is a deep U-shaped curve in the stock markets. With all of the pessimism surrounding the markets, a trigger to alleviate all of that could send the markets flying. Until then, we might be heading down for quite some time -- and in force. I would not be ruling this out. Perhaps an unintended bubble may be created a few months out - and another slight burst before we go marching on our way.

Mar 08 11:53 PM

[Dave Wrixon:]

I am calling Barron's a Bottom.

This ain't over yet!

Mar 09 12:46 AM

[Mr. Ed, Jr.:]

Ah, yes...One of my favorite party games, although we call it "Your stocks are cheap relative to...." and then you have to fill in the blank about your opponent's portfolio.

Last year, we used answers like "Book value" or "Level 2 assets", but that always caused arguments, because it was all made up stuff.

Nowadays, when we play, the winner says something like "postage stamps" and we all laugh so hard, usually someone's beer will shoot out of their nose.

But we all agreed to pool what is left of our money and buy, buy, buy next week. Not stocks-- postage stamps.

Mar 09 01:02 AM

[Jake2:]

No bottom until the financials are fixed. My 2 cents' worth.

Mar 09 01:39 AM

[User 372304:]

Let's see. Bush and cronies were in office for eight years and created this mess...in spades. And the wizards at Barrons have the audacity to call this the Obama Bear Market. Give us a break guys. He's been in office for less than seven weeks.

If there is any hope...it's going to come from the practical, realistic, transparent policies of the Obama Administration. Wall Street deserves all of the pain they have created from Grasso to Madoff. It has become one crooked, corrupt place that deserves to go down, down, down. Then maybe we can start rebuilding a society based on truth, service and peace.

Mar 09 01:42 AM

[curious cat:]

great idea, mr ed. buy the forever stamps and you will be able to "lick" inflation. personally, i don't care one whit, let alone a whole whittle, about what magazines think. i remember when one of them had the ceo of enron on the cover, as man of the year or something, a year before that company blew up.

you may not want to buy yet, but you'd have to be an idiot to sell now. if you've sat through the last year, you are close enough to the bottom. of course, you could buy some gold miners if you've neglected them. the only thing i know for certain is this. if you spend trillions, you will have inflation and the dollar will devalue. precious metals and energy, denominated in dollars, will go much higher.

Mar 09 01:55 AM

[Steven Hansen:]

as an investor there are two reasons i buy: 1) this is a good investment and i will make money or 2) speculative as the market is moving in a certain direction and you just ignore the fundamentals.

no one is saying the economic future will be brighter than today. they only use the word recovery which is code for the economy is no longer falling.

overall i see most corporations in for a rough ride with lower profits.

if this is the bottom, i will let others grab this and run as this decision is speculative and not based on any reasonable data.

Mar 09 02:43 AM

[Maxe Paul:]

" a Citigroup economist's 2009 earnings estimate for S&P 500 components puts their collective P/E ratio at more than 13, which is where a bunch of bear markets bottomed - except 1974, '82 and '87 when P/E went as low as 8.5. If we get down to 10, S&P could fall another 25% to 500 and DJIA around 5,000. But that probably won't happen, because in previous downturns Treasury yields were much higher, and because another Citigroup analyst says he's seeing signs of panic."

Wow, so two Citigroup analysists are obviously better than one, so it must be right! The fact two Citi analysts claim they see something happenning should be twice a warning of the opposite occurring.

Who would listen to these clowns given their stock price?

Joke, "how many Citi analysts dose it take to change a light bulb?, none because they cant afford the power bill!"

Mar 09 05:04 AM

[joshuaodonnell:]

Im calling DOW 4500. Dont believe me? Watch what happens. Will bounce around a little here and there, but ultimately we are going lower. What have we done in the past?

We rallied on the ban on short selling, then the market tanked. We rallied on the stimulus, then the market tanked. Well, they will probably announce they are ending mark to market...what will happen? will rally, then the stock market will get CRUSHED and will get as low as 4500 on the DOW. Dont believe me? Watch what happens.

Believe whatever you want. Im just taking this into a historical perspective...Also everything booyahead(Cramer) has said has just been wrong. Every bottom call he's made has been WRONG. and continues to be wrong. Yet, some politicains take his que. Its amazing..................

Mar 09 06:17 AM

[donzelion:]

"(1) Stocks are cheap relative to book value."

If the premise is true, then we should see "happy marriage" mergers in 2009, rather than "shot gun marriages" of 2008. We get several pharm mergers of note (PFE + WYE, and several others, including now possibly Merck + Schering), but since they're restricted to one sector, I can't read that as a signal about the economy as a whole (more likely, the mergers show unhealthy prognosis for that sector - as the merger wave in the mid-90s did for petrol).

"(2) Stocks are cheap relative to GDP."
Rather, the observation should be, cheap relative to "US" GDP. Stocks are even cheaper relative to Japanese or German GDPs, but I hear few people calling bottoms in Japan.

"(3) Stocks are cheap relative to gold."
Stocks are also cheap relative to the cost of a wonderful steak in your typical NY steakhouse, but that doesn't mean we're at market bottom, or really, anything at all.

Mar 09 06:54 AM

[tginomorebush:]

barrons idiot like "savidge" continue to make their money shorting the market ........... watch out when they say anything remotely positive

Mar 09 08:21 AM

[morph366:]

With dire economic news and further evidence of financial miscalculations on a gargantuan scale becoming almost an hourly experience this is not the time for being heroically prescient. Bear markets end when no-one is paying attention and not when plenty of analysts were making claims that the employment data released on Friday was the turning point - on what basis I failed to comprehend.

The 15 minute chart for SPY shows some late buying on Friday and some are suggesting that having hit the 680 level we are due for a bounce. Others are pointing to the possibility that the hearings in front of a House Financial Services subcomittee this Thursday to review the issue of "mark to market" accounting could also, if the rule is suspended, at least on a temporary basis, provide an excuse for a very sharp rally.

While that is certainly a possibility it does seem that too many people are expecting a violent short squeeze. Should the committee suspend M2M there would be a relief rally but the magnitude may not be as strong as some are hoping for as my sense is that most recently the majority of the selling has not been fuelled by massive short selling but rather a continuation, even acceleration of, long liquidations from pension funds and insurance companies.

Mar 09 08:40 AM

[bike 05673:]

Recs: 3 Who killed more Americans???
When Al Qaeda killed 3000 Americans at the WTC we sent 150,000 men and trillions of dollars running after them all over the world. The American born financial terrorists I bet killed many more than 3000 (thru stress and heart attacks)after saving and investing for over 30 years and losing 50% of their hard earned money. Imagine if the SEC had a 150,000 thousand man army and unlimited trillions to go after the American born internal financial terrorists. This huge financial collapse had to involve huge amount of illegal activity. In Fact the head of SEC enforcement was so embarrassed by the Bernie affair she quit. Fiduciary responsibility seems to me, to be a ancient English term that should be removed from the language. We will never restore confidence in markets without rounding up and JAILING the culprits of which there are many.

Mar 09 09:11 AM

[Harry Tuttle:]

"Barron's Calls a Bottom"....one more time.

Mar 09 09:28 AM

[pacman1947:]

This is a rather amusing article about psychological factors that predict market movements. My wife reads Business Week, Forbes, Barron's, Money Magazine, and Fortune magazine as well. She tells me what they say. My son has excellent instincts, and says that psychology is the only driver. The problem that remains clearly: the human mind is not particularly amenable to predictive analysis.

My son thinks that we should invest in gold. I told him how The US emptied Fort Knox to buy cash to prevent a banking crisis after the crash in '87, which obliterated the gold market. It happened twice that year, again just before Christmas. So much for gold. Past performance was not predictable. Who knows what the central banks will do this time?

Barron's folks have a right to their opinions. I just don't share their optimism this time.

Mar 09 10:58 AM

[BigOlDave:]

Well, Eli:

You've certainly drawn a cloud of comments with no consensus. Consensus -- as reflected in market movements of late -- seems to be that we have a way to fall yet. Nonetheless, digesting and passing on Barron's perspective is useful and you've done it well.

Dave

Mar 09 11:37 AM

[mr freddo:]

Didn't 10 out of 10 Barrons analysts predict that stocks would go up in 2009? I believe that was when the market was at 8500.

Most of the points mentioned are bogus. S&P Earnings look cheap because the estimates are too high. Gold looks cheap so buy gold. The past is not an indicator because we have never had a financial system meltdown with exponentially expanding losses thanks to the derivatives markets.

Nothing will improve and things will get worse until the financial system is allowed to crash and burn and is then replaced with new banks with clean balance sheets and no derivative exposure.

Mar 09 12:02 PM

[coffee is f...:]

At this point, the forever stamp looks like a pretty good investment.


On Mar 09 01:02 AM Mr. Ed, Jr. wrote:

> Ah, yes...One of my favorite party games, although we call it "Your
> stocks are cheap relative to...." and then you have to fill in the
> blank about your opponent's portfolio.
>
> Last year, we used answers like "Book value" or "Level 2 assets",
> but that always caused arguments, because it was all made up stuff.
>
>
> Nowadays, when we play, the winner says something like "postage stamps"
> and we all laugh so hard, usually someone's beer will shoot out of
> their nose.
>
> But we all agreed to pool what is left of our money and buy, buy,
> buy next week. Not stocks-- postage stamps.
>

Mar 09 12:36 PM

[Juliet:]

I thought the bottom was reached only after everyone stopped calling a bottom.

So, stop already.

Mar 09 12:44 PM

[henarl:]

Barron's calls bottom - whoopee!. All we need now is a cover on Time magazine showing a pile of stocks down in a big hole with the headline "BOTTOM FINALLY REACHED" I'm ready to go all in.

Mar 09 12:49 PM

[bbowen7:]

It is clear that retirees are screwed - first by having their portfolios cut in half; then by inflation which will cut their fixed incomes in half. Where do you suppose this fits in Obama's drive to "spread it around"? The double-whammy is Obama's gift.

Mar 09 01:15 PM

[bobbobwhite:]

The main logic I use in this curious market is deductive, to wit, with stocks so low now with possible fortunes clearly to be made by many plain old Americans buying now and waiting for stocks to return to their old highs within a "reasonable" period of time, why would Wall Street allow mere Main Street Joes the chance to participate in that exclusive fortune-making club when Wall Street has always held that Fort Knox opportunity in its golden but iron fist for only the most wealthy and name-worthy of Americans?

As a result of the above, I deduct that Wall Street has determined that Main Street will again not be given that chance, as it never has allowed it and doesn't intend to start now, and the snake belly-low stock prices of today are merely a calculated delusion of great riches ahead that will turn to dust and will not make great fortunes for anyone other than those who have always controlled the lion's share with their iron fists. Nothing has changed; it's still Barnum's circus with an updated "look" designed to fool today's more cautious "investors". Caveat emptor, but today more than ever.

Mar 09 01:34 PM

[techocracy.net:]

How can you say P/E ratios are low when predicting earnings is so difficult? American savings rates are going through the roof. Good luck predicting earnings when people are terrified to spend money.

I would only value companies on balance sheets right now.

Mar 09 01:51 PM

[Analyste de...:]

YES, how many times has Barron's been discredited calling a Bottom so far? If the paradigm's over, they've been proven clueless, or why aren't they telling the subscribers that Citi & GM are screaming buys? The Emperor wears no clothes, so what's going on?

The Market isn't driven by fundamentals anymore, the Working Group is intervening as aggressively as ever, since 2003 at least. As a libertarian and Ron Paul voter, I see NeoCons stymieing attempts to rally sentiment and tacitly calling for a Market Boycott (a la Ayn Rand, "going John Galt") succeeding, so far. Fantasist entrepreneurs like Joe-The-Plummers and guru Limbaugh certainly got the memo; this planned obstructionism continues to thwart any orchestrated shift towards optimism. The Republican campaign to sabotage the Market is winning.

Rightwing politicos will continue to drive stock prices down (dishearten the Sheeple to fortify & enlarge the Repubs' reactionary base) until the Obama Administration effectively caves in to NeoCons demands. THAT will be the Market's Bottom; until then, expect more downside and continue buying physical gold as a wipe-out hedge. BUY THE DIPS, remember that mantra? LOL!

I wouldn't rule out playing a short sharp rally (as I did on 20 Nov 2008) but I remain very Bearish longer-term. How low will it go? S&P500 at 545 or so, I'll guess. The nominal price will rise from there - hello, hyperinflation! - yet might remain a relative loser's bet for the next decade or so. So many unknowns, now. It's amusing that people blithely still chatter about "long-term investing," you may not wish to remain in the USA when a Sarah Palin comes to power in 2012.

It really is different this time, and Barron's still doesn't get it. Why would you expect anything but bollocks from the groupthink corporate media, anyway?

Mar 09 02:24 PM

[Whitehawk:]

I agree. M2M and the Uptick Rule are red herrings. Remember the tech bubble when the Uptick Rule was in full force? Yep. And banks have every chance (and have had) to report numbers other than M2M (special reports, footnotes). The 5350 bottom doesn't seem all that unbelievable given the fundamentals and sentiment. Always keep cash on the sidelines to get in when others have really gotten out.


On Mar 09 06:17 AM joshuaodonnell wrote:


> We rallied on the ban on short selling, then the market tanked.
> We rallied on the stimulus, then the market tanked. Well, they will
> probably announce they are ending mark to market...what will happen?
> will rally, then the stock market will get CRUSHED

Mar 09 02:33 PM

[Fred Voetsch:]

You can't argue with Barron's, you can only laugh at them when the Dow is at 5,000, 4,000, 3,0000...

Mar 09 04:14 PM

[Jagger:]

I thought we would bounce at 7200 and now I find 6500 is in doubt. Too early to call a bottom in my opinion. Lower before we go higher!

Mar 09 07:29 PM

[guychan:]

Well, geez, if the Bottom is the point of Maximum Pessimism, and to judge by the above slew of negativism, we can't be THAT far.... !

Mar 09 08:05 PM

[promod:]

Finding bottom in bear markets is difficult than in a bull correction. The question we must ask is whether we are ripe for a bear market rally! Perhaps not!

Mar 09 10:44 PM

[markg:]

This is one truely asinine statement. The fiasco started with Mr. Blue Dress himself wanting to put every breathing person in a house, continued by a democratic congress applying heavy pressure to relax lending standards. And continued by the general ineptitude of Bernanke et. al. There is plenty of blame to go around, including but not limited to Bush.

The problem isn't Obama's length of term in office, its the fact he promised a solution, and all ideas proposed so far have been hopeless. He can't even nominate cabinet members who can be confirmed without problems. So far he hasn't done much to gain credibility. And I hope that changes soon.

A great deal of general greed and carelessness by the financial industries lead to the rest. This is the group that thinks passing paper and getting points is a value added business and they should get millions for playing the bigger fool game on a grand scale.

On Mar 09 01:42 AM User 372304 wrote:

> Let's see. Bush and cronies were in office for eight years and created
> this mess...in spades. And the wizards at Barrons have the audacity
> to call this the Obama Bear Market. Give us a break guys. He's been
> in office for less than seven weeks.
>
> If there is any hope...it's going to come from the practical, realistic,
> transparent policies of the Obama Administration. Wall Street deserves
> all of the pain they have created from Grasso to Madoff. It has become
> one crooked, corrupt place that deserves to go down, down, down.
> Then maybe we can start rebuilding a society based on truth, service
> and peace.

Mar 09 11:06 PM

[Greenmonday:]

what a laugh! This article claims we can hit bottom at valuation levels quite higher than in 74 and 82 and yet conditions now are just as bad if not worse (and mabey will get a lot more worse) than those 2 prior periods.....that makes SOOOOOO much sense. lol!


by the way...everyone seems to be playing for a bounce here even the bears on mark to market hopes...guess what?...it wont happen!

Mar 09 11:11 PM

[orangutan:]

Citibank is owned by the stockholders. It's YOUR bank. Your bank (the one you are the owner of) screwed up. YOUR bank can't cover it's obligations. You, and all your fellow stockholders, were the only ones who were going to get all those nice dividends and share price increases. Yes, if the government has to come in and mop up a bankrupt bank, it is fair that the stockholders are the first ones to lose their money. In fact, they've already lost it. What's unfair is that the taxpayers are propping up your mess and letting you keep your equity. PS: Why did you, the owners, let the execs write themselves such big paychecks?

Owning a stock is not the same as depositing money in a savings account.


On Mar 08 10:54 PM ziggysellsbills wrote:

> If e.g. Citibank is nationalized and the current stockholders get
> zip!, and the execs get paid out and the government runs it for say
> 6 months followed by reissuing common stock and selling that to the
> public at large for a pretty penny, how is that fair to the existing
> stockholders? And what kind of a deal is it for the new stock purchasers?
> The whole thing doesn't make any sense to me... anybody got some
> sense of what's fair to all parties concerned?
> ziggy

Mar 09 11:54 PM

[mwfall:]

have you seen some of these people at barrons?
you might want to get a chimp's opinion to increase the credibility.

Mar 10 12:39 AM

[mkreisel:]

Stock holders are nothing compared to bond holders and depositors in a bank.

Mar 10 01:40 AM

[Not_A_Guru:]

Personally I don’t believe what any of these financial analyst/magazines /newspapers since it’s very hard to predict human psychology which is what drives the bull and the bear in my opinion. However I do think we will see a turnaround by the summer, not due to any stimulus package or job growth but just due to the simple fact, that unlike the 1930’s generation x/Y love to spend money even if they don’t have it to spend . Eventually the 89 or 90 percent of the General population who are employed will spend money and will start a new cycle and a new bull market and by 2014 another recession will be on it way and we will post the above comments again. That just the way we are, it all about human wants and needs

Mar 10 02:32 AM

[Dean M:]

I don't see how you can simply ignore the historical data presented in the Barron's article any more than you could ignore the trends in unemployment or housing affordability going into the downturn. Are we at a bottom, no. But stocks are approaching historical levels of reasonable value compared to the past couple of decades. That should make them a relatively safe investment once the economy improves in another 6-24 months but I wouldn't be looking for a raging bull market as some are suggesting.

Mar 10 08:47 AM

[Dean M:]

In other words you agree with Barrons that we're much closer to bottom than top of 14k.


On Mar 09 06:17 AM joshuaodonnell wrote:

> Im calling DOW 4500. Dont believe me? Watch what happens. Will
> bounce around a little here and there, but ultimately we are going
> lower. What have we done in the past?
>

Mar 10 09:26 AM

[the homeles...:]

There has been quite a bit written over this last weekend about valuations, technical, sentiment, yadda yadda, yadda; I haven't seen anyone mention the one incontrovertible sign of a bottom; "The Warren Buffet Capitulation!"

Mar 10 10:53 AM

[Just Say Whoa!:]

Good time to short the S&P before the next bump down!

Long: RYURX

Mar 10 11:25 AM

[The Donald:]

I love posters who attempt to degrade others by making fun of their spelling and typing skills. In the end it comes down to who is more successful. As they say in Texas, you just have a big hat...but no cattle!


On Mar 08 09:29 PM User 354104 wrote:

> "Paradyne Shift"??
>
> Please... You need to at least use the correct word, which is "paradigm",
> if you are trying to sound even remotely intelligent.

Mar 10 11:50 AM

[aarc:]

Government almost done investing in banks and other financial companies? We may have the makings of a bottom for the banking sector but not necessarily the whole economy.

What are the next moves?

- - Re-impose uptick rule (short term);

- - Suspend Mark to Market rule or rather "guideline" (short term).

- - As the economy shows no sign of recovery in the next 6 to 9 months; provide additional capital to banks and call it Economic Recovery Program instead of Banks Stabilization Program. More money for credit, faster recovery. With no additional liar loans, banks are bound to make money on new loans.

- - "Encourage" banks to provide dividends or increase existing dividends to encourage more private re-investments into the banking sector (which will also provide more income to the government as the govt will be holding a lot of common stocks later as we progress thru this banking rescue programs). A win-win situation for private investors, the government, and the banks.

- - Suspend or remove dividend tax in the medium term to hasten recovery of bank stock prices. Soon, the governemnt common stock holding will be appreciating at 5x to 10x their initial conversion price from preferred shares.

- - Suspend or remove capital gains tax in the medium to longer term giving the final boost to banks stock prices. The government can then unwind their common share holdings at 20x to 50x initial cost.

Govt will have to re-negociate their reverse put option so that banks will not be initiating common stock retirement or buy-backs from the government holdings as banks stock prices start to sky-rocket.

Mar 10 01:56 PM

[mrfolly:]

Jim Cramer didn’t recommend buying Bear Stearns stock a week before it
collapsed — he did it five days earlier.

Watch Jon Stewart rip on Cramer:

madoffwatch.org/?p=384

Mar 10 01:58 PM

[Jack Walker:]

Eli,

How many times has Barron's called the bottom in the last year?

In the long run equity prices are a function of earnings and there is no confidence in the current earnings projections. Nobody can accurately project earnings in this envoronment.

Jack

Mar 10 02:40 PM

[denis lemieux:]

How about the seven decades of comparison that Doug Kass has done and found that the S&P bottoms at 11.5x Normalized Earnings which puts us at a fair value of the S&P at 800?

Mar 10 05:00 PM

[mac.barron:]

Barrons? A couple of weeks ago didn't they say that those of us who didn't game the system should pay to bail out those who did? Yeah, that's exactly what they said, in an editorial on their cover by Ed Finn.

Now these a-holes call a market bottom?

Nope. No way. More layoffs. Lower profits. Further Credit woes.

Look, even if M2M gets redone we still have the exact same economy the next day and the same threat of inflation looming over us as we do today. Barron's has shown, in that piece-of-crap editorial, that their fundamental judgment is unsound. If you listen to them and get torched you'll only have yourself to balme.

Mar 10 05:30 PM

[billddrummer:]

On Mar 10 11:50 AM The Donald wrote:

> I love posters who attempt to degrade others by making fun of their
> spelling and typing skills. In the end it comes down to who is more
> successful. As they say in Texas, you just have a big hat...but no
> cattle!

To The Donald,

I define 'successful' as someone who knows how to spell.
How do you define it?

As a follow to the commentary, as when analysts were trying to gauge the peak of the housing market, the bottom of the housing market (not yet), the onset of the recession and the beginning of the recovery (not yet), you can't call a peak or a bottom to anything until indicators look down or up, depending on what you're attempting to predict.

Which is a long way of saying only in retrospect can you evaluate market turns. The reason predictions are so popular is the same reason people read their horoscopes: They want to know what the future holds before it arrives.

Unfortunately, that's impossible. But Barron's and everyone else with an opinion will attempt it.

Mar 10 07:41 PM

[Hanging In ...:]

The man has been President for six weeks. I'm not sure if you noticed or not, but the economy was going down the tubes and we were in a serious bear market long before Obama took office! You expect him to fix this mess in 6 weeks? You expect him to make policy based on short term fluctuations in the stock market indices? Personally, I'm happy he is more intelligent than that.


On Mar 08 11:11 PM Donald Johnson wrote:

> Tomorrow's WSJ says 5000 is possible on the Dow, corporate bonds
> are coming down while interest rates are rising and 13% unemployment
> is in the cards, if not already here.
>
> Investors are calling this the Obama Bear Market and have been since
> summer because the president thinks "profit ratios and earnings ratios"
> are different.
>
> We have a president who doesn't listen to the markets any more than
> the professional money managers who helped create this mess.
>
> The prospects of higher taxes, soaring deficits and Obama's clueless
> clique blowing it has smart investors scared out of their skins.
>
>
> That GM, GE, Citi, BAC and other institutions are in so much trouble
> is feeding the panic peddlers. We're all panic peddlers. The market
> is a panic peddler. And everybody in the world but the Obama clique
> are listening.
>
> Until Obama and his team get it, we're going to continue losing it.

Mar 11 01:28 AM

[Atlas Shrugged:]

Obama's wording only shows he's never been an investor. He has, however, taught Constitutional law at the graduate level for 12 years. Do you think that might be a more relevant qualification for the Presidency? Bush was a businessman and investor, and look where that got us.

-Atlas


On Mar 08 11:11 PM Donald Johnson wrote:

> Investors are calling this the Obama Bear Market and have been since
> summer because the president thinks "profit ratios and earnings ratios"
> are different.
>
> We have a president who doesn't listen to the markets any more than
> the professional money managers who helped create this mess.
>
> The prospects of higher taxes, soaring deficits and Obama's clueless
> clique blowing it has smart investors scared out of their skins.
>
>
> That GM, GE, Citi, BAC and other institutions are in so much trouble
> is feeding the panic peddlers. We're all panic peddlers. The market
> is a panic peddler. And everybody in the world but the Obama clique
> are listening.
>
> Until Obama and his team get it, we're going to continue losing it.

Mar 11 01:38 AM

[Obi-Wan:]

Here's something for all the prognosticators out there.....bottom's up!! LOL

Mar 11 12:57 PM

[AlexS:]

It's not an Obama bear market. It's a Pelosi/Reid bear market. They've been in charge since 2007, coincident with the market starting to fall. It's their bills that have passed Congress. Obama is just a front man, a PR guy.

But Obama's getting his stuff in place. In a year or two it will be an Obama bear market.

Mar 11 06:09 PM

[stockstalker32:]

The only bottom we are experiencing right now is a sucker's bottom, market still has some bleeding to do, see here crashmarketstocks.com

Mar 11 06:16 PM

[Tim H.:]

We won't know until years later whether this was a time to buy or stay on sdelines waiting for lower market. Will you say d_mn I wish I'd went 100% in stocks March of 09 5 years from now? As for Obama... I invest, I am down in my 401K and I own AMSC which is holding it's own from where I bought it ($15). Who on here did not see last several years all these wall street deals, derivative trading making big bucks fora select few in a very short-time? This is what lead to the greed unchallenged by government oversite while mainstreet USA saw their paychecks shrink and health care, energy expenses rise? Plus the infrastructure of our country decline? Now Obama has made mistakes and like any person is fallible. But I support in what Obama i trying to do. He is looking long term at what is best for this country. Heck now he is getting push back from DEMs in congress. Look at health care. Why is street and soo many in insurance/hospitals etc... Afraid of giving Americans a choice of pvt insurer or health insurance such as congress gets? Because they know what people would do. But that recent study out by that non profit group showing such a program would save 2 Trillion dollars over 11 years and cut a person's health insurance 20%. Now forget about all the arguments for a minute and think about that. Health care reform that would save 2 Trillion over 11 years and cut premiums 20%. What do you think a plan such as that would do for the overall health of the US economy in future? Would it not be good? The idea of getting off dependence on foreign oil by alternative energy. Is this not a good idea? Making the quality of our education better. Is this not good? Investing in infrastructure for this country. Is this not good? Yes short-term we all see alot of pain but long term... I am talking 10-20 years these ideas, plans could pay off huge for our nation. If mainstreet does well wall street will do well. Rather than wall street doing well at the expense of mainstreet!

Mar 11 10:58 PM

[ussmls7:]

85 Trillion Toxic reasons to not call a bottom.

Mar 12 09:59 AM

[JJS - John:]

Hello folks:

I am a baby boomer bankruptcy lawyer, working primarily with small business and individuals. I also have interests in real property and several start ups. I also have training, both through university and the school of hard knocks, in real world ecconomics.

I think I would qualify to make some remarks on our current situation. Take it or leave it, but I hope you will think about what I have to say.

Like everyone else, I let myself get down when reading all the "news" regarding the status of our ecconomy. It is hard not to be blue over what our country and the world apparently face.

On the other hand, as a bankruptcy lawyer, I see that every desperate situation has unexpected positive outcomes. You need but look at each situation individually, rather than just painting every thing with the same "panic paint".

This is the entire basis of our captialist system. Capital, labor and research will always eventually move from those entities and market segments which have gotten too fat and sloppy, too greedy, and are no longer inovating and/or creating what is wanted and needed by the populace, and move to those areas which do.

Regretably, it often takes a crisis, in both personal and small business finances, and in the larger sense, with the entire econommy before a change takes place. We seem to do things, both individually and collectively in starts and jerks.

Everyone is afraid to rock the boat and change, until is seems too late. Average folks, for whom I work have seen this coming for a long time. Yet, like every one else, including myself, we closed our eyes and hoped it would all just go away. We have learned yet again that it never does. Igorning something does not make it go away.

Our entire system had gotten too sloppy, top heavy, and was due for a major correction and reorganization. Not just one business or sector, but the entire system. It was enevitable.

We must now look to the future and see what silver linings we can find and follow up on, rather than continuing to bemoan what has already occured. In other words, it is time to wake up and look forward, not backward. You can not change the past, but you can learn from it.

I am all for rewarding tallent and success. On the other hand, those at the top of major corporations were not compensated for their talent and success, but were rather reaping obscene salaries and profits, primarily due to good old boy and girl interlocking directorates and executive compensation committies, while seeming to care less about the majority, being equity holders, workers and stake holders. It has now come back to haunt them, as a rubber band stretched to its extreme will.

The problem is that those most responsible for the mess will mostly leave their positions (retire)with their huge accumulated "pots of gold" from prior years compensation and their equally large "golden parachutes". They will suffer little for their bad management practices and self serving operation of the companies for which they held/hold a fiduciary responsibility. They will only come out of this mess wealthy, rather than uber wealthy. I do cry for them.

On the other hand, equity holders, workers and stake holders are the ones taking the real hit. They lose the most, though they have the least to lose.

With that said, where do we go from here? I am an optomist and a capitalist. Some will come out of this mess wealthy, though undeserving. Many will be temporarily crushed by this.

Thank God for America's social safety net(s), mostly set in place as a result of the Great Depression. No one should starve in America, though life styles will be dramatically impacted for a while, until we come back in to balance.

We (Americans) have so much to look forward to. Though I did not like Reagan's ecconomics, I did admire his attitude. Like FDR, Teddy Rosevelt, Lincoln and Kennedy, amoung others whom I admire, I believe this is a great country and that our best times are ahead of us.

I hope and pray that Mr. Obama can lead from the "Bully Pulpit" and not just try to put out fires that have already started. We need an optomistic "leader", not another "nea sayer". I think we have elected the right man. Time will tell.

Has any one realized how fast our ecconomy and individual industry sectors are already changing? We are developing electric vehicles. The progress has been dramatic.

We are rapidly developing wind energy, solar energy, biofuels and other forms of clean energy. I have read that in 10 - 20 years, most home owners will develop 25 - 50% of their own energy needs. Who would have thought? Again, dramtic progress.

Our Universities are turning out new discoveries, inventions and improvements on existing methodologies soo fast, that it is impossible to keep up with them all. Most are buried in tech journals and few folks are even aware of them. Health care inovations, genetic mapping and bio-engineering are opening up fantastic new vistas in health care and longetivity.

Our population is aging, but, on the whole, we are in better health longer into our old age than at any time in history. We are continuing to be productive much longer than our parents and grandparents. Methusala, we are headed your way.

Communications and the arts are flourishing. I can get any type of entertainment, eat any kind of ethnic food, and experience almost anything I wish, from anywhere around the world, and never leave my little safe city of Des Moines, Iowa. Kings and Emporers never had it so good in the past.

Human relations and interaction, (other than our extremist Muslim, Christian, Hindu and other brothers and sisters, who keep trying to fight for dominance and continue old feuds), are at the highest point ever. We are, on the whole, tolerating and learning from each other. We are taking the best from everyone and every culture, and thus dramatically improving life for all.

The rest of the world is rapidly coming up to our ecconomic standards, while we continue to inch ahead. People who are fat and happy and are involved in business, thus having a stake in world peace, don't go to war unnecessarily.

The majority is tiring of all the extremeism and is marginalizing that small minority. They are being seen for what they are and left in history's dust.

The news only seems to sell if it is negative, especially on right of center tv and radio. I think folks are tiring of that message also.

I propose that we start looking at all that is going right. Change is only being excellorated because of the current financial problems. Believe it or not, a lot of good has and will come out of it, and we will be better off in the future.

In summary, look for and dwell on the positive, not just the negative. Other than what I hope is a short bumpy patch of road, we are continuing on our way up as a Nation, as a people, and as a world. We are in fact excellorating ahead, if one but takes an honest look. I see not only a small light at the end of the tunnel, but a very bright future ahead for all Americans and the world in general.

Thanks for hearing me out. I feel a lot better having my two cents put out there. Best of luck to everyone!

JJS

Mar 12 05:46 PM

[James H. Wang:]

They might not be wrong, but they'd probably be more credible if they (along with the other analysts) haven't called it quite a few times already.

Mar 13 12:41 AM

[ManAboutDallas:]

It'll be the bottom when Alan Abelson is selling pencils and apples from a stand on 42nd Street.

Mar 13 01:10 AM

[toothfairy:]

o you really believe Bush did this?

Do you really believe the mess were in happened in just 8 years?
No my dear friend, it didn't. Do a little research. You will find that this mess is YOURS, MINE and AVERAGE AMERICAN's mess and that the roots go back 20 years or more.

Why?...Lets see...Do you understand that we no longer manufacture anything in this country that isn't perishable? Do you know why? Because some believe its OK to earn $45-50hr to bolt on a bumper with next to nil education? UAW does and for that matter, many unions do. Too bad the Chinese DON'T! So their labor and production costs are about an eighth of ours.

We believe we DESERVE things simply because we're alive...wrong answer. People in other parts of the world are willing to do what it takes to feed their families. Next time you're in WalMart, see how long it takes you to find something that's "made in America" and isn't fruit. THINK ABOUT IT then call your union local and tell them "thanks, for all you do".

Let me be clear here...stop looking for somewhere to place blame for this mess; its YOURS and MINE.

EVIL lenders need Greedy and STUPID people to dupe ...yes, YOU and ME.

EVIL Wall Streeters need ignoramuses that do not understand simple physics: there's no such thing as perpetual motion (look it up! I'm not kidding). You cannot have continuous double digit gains for ever.

EVIL Banks did not force you into an American average of $12K of revolving credit debt per family. YOU and I needed INSTANT gratification...the BIG LCD or the Lexus (no matter that its WAY beyond what we can REALLY afford)

EVIL industrialists did not send our jobs to India, China and Vietnam because they thought it was more fun.
They sent them there because UNIONS (oh yes, YOU and ME again!) think they DESERVE $40-50p/h to bolt on a bumper with only HS education. Turns out people with master's degrees are happy to work for $10p/h in Bombay

If you REALLY want to KICK the guilty party for this mess...go look in the mirror and WHACK THE HELL out of the idiot you find there. Its not Clinton, Bush or Obama. Its YOU and ME. WE made this mess and now the hens are coming home to roost.

Government is not going to fix this (how much more "PORK" can you Stand in the name of "stimulus"?). YOU, I and the rest of ordinary Americans have to fix this! We have to realize that the word "Deserve" means MERIT not ENTITLEMENT. Right now, we are getting what we "Deserve"...lets change that. Want more pay?...then DO MORE WORK, want better pay...THEN GET BETTER JOB, want better job...THEN GET MORE EDUCATION/TRAINING...b... most of all, DO THE BEST -YOU- CAN at whatever you do!

Man up! quit looking for somebody to blame.

BTW, the state of California has determined that Obama kool-aid causes cancer; don't drink it.

Mar 13 01:17 AM

[LoveShorting:]

Mr. Cohen - - how do you feel today about the cheap shot you took at the only print journalism source I use, in effect, my bible? Still looking for 550?

toothfairy - - you get an A for insight. you write the truth, hope we can stand it. oh, and you're funny too. keep writing.

Mar 13 08:37 AM

[robert.b.fe...:]

Since we dropped through the last floor to a new bottom I wouldn't be calling this the bottom. A bear market rally after such a drop is to be expected. Normal trending would be flat to choppy followed by a retest of this low in a few weeks. If this low is sustained at that dip I would consider that a promising floor but would still want to see a sustained up trend before calling it the bottom.

Mar 13 04:50 PM

[James Wilson:]

They listen to Rush Limpburger and he lived with his mommma at 42 years old.


On Mar 09 05:04 AM maxe wrote:

> " a Citigroup economist's 2009 earnings estimate for S&P 500
> components puts their collective P/E ratio at more than 13, which
> is where a bunch of bear markets bottomed - except 1974, '82 and
> '87 when P/E went as low as 8.5. If we get down to 10, S&P could
> fall another 25% to 500 and DJIA around 5,000. But that probably
> won't happen, because in previous downturns Treasury yields were
> much higher, and because another Citigroup analyst says he's seeing
> signs of panic."
>
> Wow, so two Citigroup analysists are obviously better than one, so
> it must be right! The fact two Citi analysts claim they see something
> happenning should be twice a warning of the opposite occurring.
>
>
> Who would listen to these clowns given their stock price?
>
> Joke, "how many Citi analysts dose it take to change a light bulb?,
> none because they cant afford the power bill!"

Mar 13 09:05 PM

[Kowboy:]

The Barron's article is misleading because it's using "operating" (liars version) earnings PE which is substantially lower than GAAP earnings PE. This link explains the difference. www.decisionpoint.com/...

Draw your own conclusions. But it looks like the Dow and SnP are still overpriced IMO.

Mar 14 11:41 AM