Fred Voetsch

Cramer's Mad Money - Paul Krugman Is Wrong (8/10/09)

"While investors equate being bearish with playing it safe, it may well mean missing a 45% gain since March."

How flawed is such a statement and the thinking behind it? Very!

First of all most of the people who were bearish also missed losing 55% of their portfolio up until March (still being ahead by 35%) and most that I know, including me, caugh this rally early and only got out after a 20% or more runup.

The worst part of this thinking, of course, is that it's based on fear, the classic tool of a bear market. Folks, you'd better get in on this rally before it's too late...HURRY! HURRY! HURRY! Fear-based investing is always a bad idea. The only worse idea I can imagine is listening to Cramer the clown.

There's Been No Basis for Earnings Fear So Far

On Apr 14 09:32 AM User 305589 wrote:

> Highly superficial article with zero content (not to speak of alpha)
>
> I suggest you read something really sensible and well-thought on
> the earnings that are coming in (and those that have to be expected
> for the next quarters):
>
> www.frontlinethoughts....


Hey, cut that out! John Mauldin is a critical thinker who doesn't just listen to the likes of Cramer and Kudlow. Please don't spoil the pollyanna party going on here with facts and data. That's not fair!

sorry...hehe....

There's Been No Basis for Earnings Fear So Far

There's no need for fear or disappointments if you are dealing with reality. A pollyanna calling realists "permabears" is just funny once you take a look at the real deal at Standard & Poors:

www2.standardandpoors....

As explained so well over at...

www.decisionpoint.com/...

...stock prices are still way overvalued at current levels unless we go back to a 1980's & 1990's economy and anyone betting on that needs to do a bit of research into historical trends and our current economic climate.

WSJ P/E data (S&P is not accurate):
online.wsj.com/mdc/pub...

P/E ratios:

DJIA: 27
DJTA: 25
NASDAQ: 12 (could not verify)
S&P 500: 56 (as of 10:48 am PST)

All numbers are (should be) based on trailing, 12 month, as-reported earnings.

As we saw with the retails sales numbers, and in fact, all throughout the economy, things are slow, at best. If you normalize earnings to $50 (a stretch, IMO) the S&P 500 should still be under 500 at some point in the not-so-distant future.

Some Laws (Like Supply and Demand) Can't Be Broken

Good article.

One must always understand that supply and demand does not follow the rules that you expect it to. There are long-term patterns that repeat based on long-term dynamics of human nature. Things "broke down" in the 1970's and even more so in the 1930's so anyone who is investing now and looking only to the past three decades for patterns has already been seriously hurt and should learn from that. When such damage (trust) is done it historically takes over a decade for that trust to come back.