John Groom

Are Stocks Actually Cheap Now?

When, exactly, willl earnings "normalize" at 70? In this decade?


On Mar 29 01:38 PM Rcsam wrote:

> That is probably the dumbest analysis I have ever heard. If earnings
> went negative, based on your analysis, the stock market would be
> worthless. You have to normalize earnings. Just as you cannot put
> a peak multiple on peak earnings, you cannot put an average multiple
> on trough earnings. The earnings of the S&P 500 normalized is
> about $70. That is a13% ROE. The ROE at the peak was 18% in 2006.
> Twelve times that is 840. Since earnings are almost meaningless in
> this free fall economy a better guage is the value of stocks relative
> to GNP. It is now 65% down from 120% in 2006 and above the depression
> level of 40% and 45% in 1974.

APIs: The Future of Content Distribution

"The oldmedia mind way of thinking"? You mean, back when media companies actually made money? And they were too "old fashioned" to want to give away their product?

Fair Value for the S&P: It's Not 440

Why do this year's expectations have to be the trough? Why couldn't earnings keep going down, as is the economy?


On Feb 13 05:17 PM Stone Fox Capital wrote:

> So why would you use trough earnings to value stocks? Surely you'd
> agree that the earnings made during a recession are depressed beyond
> normal levels. Thats why the theory of normalized earnings comes
> about. What would earnings be if the economy grew at a 'normal' 2-3%
> rate each year. The stats I've seen show $100. Maybe thats too aggresive
> and we'll actually see a downshift in what is considered normal going
> foward, but I'd then have to argue that $80-90 would be much more
> normal then the current $60. This years expectations have to clearly
> be the trough going forward.

Fair Value for the S&P: It's Not 440

This just shows that Ritholtz knows more about valuations than this author. in fact, the market at the bottom typically assigns an average multiple of 10, not 15, to earnings, so, if anything, Ritholtz is being generous. Your last point about current valuations just shows that the market is overvalued, and heading down. Non cash writedowns represent real assets, for which stocks, such as Yahoo, are valued as much as earnings. If assets come down, so will earnings, in time.

Setting the Record Straight: Taxpayers Not Funding JP Morgan's Bear Buyout

sorry for the test results, but my first comment was erased: as follows: this author is a sophist. Clearly, the 29B is a taxpayer liability, of which some, perhaps all, will eventually be realized, making us that much poorer, other things being equal. And if this isn't clear to you, you must be from an academic background, mastering the art of obfuscation. Everyone else sees the Bailout for what it is.

Setting the Record Straight: Taxpayers Not Funding JP Morgan's Bear Buyout

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Setting the Record Straight: Taxpayers Not Funding JP Morgan's Bear Buyout

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Yang is Back! And So Is MicroHoo

All the posts like this that don't actually source anyone but just refer to "insiders" are kind of worthless. Of course, the "insiders" would like everyone to think a deal may happen so they can sell out at a higher stock price.

The Stock Market: Searching for Signs of Intelligent Life

Intelligent life in the stock market? I don't see intelligent life anywhere. If someone does, please let me know where to look.

Yet Another Reason Not To Sell Your Berkshire Hathaway Shares

I'm with Jay, I don't think that trade ever occured. It does not appear on the "low" quote on Yahoo finance or elsewhere.

Should We Force a Housing Bottom?

$3,000 per American worker - that is what this bill will cost; all to transfer money from the prudent to the imprudent. One of the greatest thefts in American history!

Where Will Yahoo Close Today?

You say that "At $32bn ($22/share), Yahoo! will trade at 16x EBITDA and that's not including the impact of their cash, their Yahoo! Japan stake, and their Alibaba stake which together add up to $14bn of value or $10/share." But in fact all of their asssets, including cash, Japan, and Alibaba ARE included in the earning figures from 2007? This stock traded at 19 before the bid, why would it trade for more now?

Subprime Mortgage Losses: Not as Bad as Advertised

As others have mentioned, I wonder where the $282B number came from? The only way that the losses from that segment would be zero, as the author implies, is if they were actually paid down by the borrowers, which I would geuss never happened. Normally you would not have half the borrowers refi within 2 years, so what is happening here? And if the $282B are in fact refis, what is the default rate on that new money? It has just moved from one pocket to another? Of the total $600, I would guess that at this point almost none of it has really been taken out of the loan pool, through borrower payment, and very few of the foreclosed houses have actually been sold to new owners, so almost none of the $600 is really "paid off".

Lululemon Athletica Discovers the Benefits of Staying Focused

Amazing that someone could write an alalysis like this without mentioning how expensive this merchandise is. So $51 dollar tee shirts and $100 sweat pants are "immune from macroeconomic" forces? We shall see.

Bill Gross: If Housing Prices Decline Further, So Does the Economy

DCM, just who was it that forced the poor homeowners to take out these 100% loans to buy huge houses they could not afford? Were the elite holding a guy to the head of these people?