Seeking Delta

Seeking Delta
Contributor since: 2010
Yahoo has PSA at ~109 which is the issue. My macro showed 25.20 for Jan 31 like above but 101.42 for Jan open.
It is definitely not down 75% YTD. I missed that one.
From the 1st paragraph:
"It should come as no huge surprise that the five cheapest global markets - as ranked by P/E, P/S and P/B - are all located in developed Europe. In fact, they are the PIIGS with Hungary swapped for Ireland. How about PHIGS (figs)?"
Even if the 35% rate is flat across all companies, deductions and credits render this fact useless. You really have to look at the effective rate.
You should really read the recent post by Prof. Damodaran of NYU. From the article, "Here is where I think our excessively complicated tax code has an effect. There is much higher variance across the tax rates paid by companies in the US, as companies in some sectors are given tax deductions and credits and others are not. I will wager that US companies spend more on tax lawyers and consultants than companies elsewhere."
The highest corporate tax rate is 35%. It is not a flat rate and the effective rate varies from company to company.
Thanks for the feedback. I was trying to keep it similar to the Investor Sentiment charts I do. When investor sentiment is most bullish I tend to be most bearish. Same with options, when call options are highest (like now) I tend to be bearish. These are contrary indicators and I am displaying as such.
Again, thanks for the feedback and I may change the labeling to make this more clear.
Higher ratio means more puts which is more bearish as I have labeled. From a contrarian perspective however, this would be more bullish. I have labeled as implied by option action not as the contrary indicator that I believe it too be.
It's a little confusing and I had to double check it a few times when I was making the chart to make sure I had it correct.
Thanks for the comment.
I have seen that study also....or a similar one in MarketWatch. I don't think a contrarian and momentum strategy necessarily have to be mutually exclusive. They both have merit and can work over the medium/short term. In the long-term though my money is on financially solid but beaten down names.
Nice article. I should have an article analyzing the benefits of re-balancing an EFT portfolio finished today. I will plan on linking to your piece.
SVU hard to pass up yielding 4.7% and CFO of $6.54 per share.
I also liked DF but didn't make a move an now it's up 14.8% YTD.
Any thoughts on using the Modigliani-Modigliani or M^2 method to measure risk. It is similar to the Sharpe calculation but has the advantage of displaying the result as a "risk-adjusted" return instead of the unit-less result of the Sharpe calculation.
I am a fan of the measurement just wondering if any one uses with clients and if it leads to better understanding on their part.
You are correct but unfortunately I cannot update. Thanks for pointing this out.
Why do people think these long-term forecasts make no sense? Earnings and more so the P/E multiple tend to be mean such a 10 year forecast should be easier to make and more accurate than a 1-2 yr forecast.
Stock trading below NNWC. Current Price is $.59. NCAV = $.98/share NNWC = $.82 and Net Cash = $.65. Average Operating Cash burn rate over last 4 quarters is $.14/share but is being offset by new investments. Need to drive into the new strategy further to see if can reverse the negative operating cash flow trend.
I agree with both your points.
New orders and inventories do show forward momentum. On rising prices, I expect these to contribute to margin compression as little, if any, of the higher input costs will be able to be pushed on the consumer.
I see your point.
I was coming from the angle that most people would say "hey, this Shiller guy is sure a bear" but using two different method to adjust for profit margins I actually get a lower (albeit not my much) forecast. My point was that while Shiller's forecast is pessimistic it could actually reasonably be worse.
Thanks ST. I agree with a lot of your comments.
Unfortunately, I think that we will be in for a bumpy ride over the next decade and barring above trend inflation not much of an increase in the nominal levels of the major domestic indices.
I would be curious to know how you are getting to a 4% annual gain? I simply don't think you can bank on an expansion in the P/E multiple from current levels.
I feel these longer-term forecasts are important and looking at the historical data is instructive. I would venture to guess that more money has been lost on the phrase "it's different this time" than gained.
I guess we can disagree on the methods but agree on the conclusion.
I can't argue that one can predict the future with certainty however I think these longer term forecast are important. Investment returns over the next decade are going to be very important for those close to retirement or already there.
It's less about the specific forecast and more about that fact that via 3 different forecast methods equity returns over the next decade for a buy-and-hold investor are likely to disappoint.
Thanks Whitehawk.
Thanks ST....and by the way, nice naming convention. I happened to be partial to that myself.
Via method #1 resulting in an EPS estimate of 73.8 I use the profit margin ratio of EPS / Sales. This method does not rely solely on domestic GDP growth and accounts for the international component. If we normalized profit margins to their post-2000 average of 6.8% (TTM average S&P 500 margins are 7.2%) then grow at 1.5% we get a lower forecast. The 85 2011 GAAP earning you reference are likely at margins even higher than 7.2%. I think this will normalize.
You are growing real earnings at 1.5% from peak profit margin levels....that is where I disagree with your analysis.
I have no superior insight on 2% vs 3% inflation.
My reticence is due to my uncertainty about inflation. Hussman, for example thinks we will see significant inflation in the back half of this decade. The market could go higher, yes in nominal terms if this happens. So if forced to price a call in nominal terms I would want hedge out the inflation. I simply used 2% inflation in order to compare with Shiller's forecast.
I would be willing to bet the CAPE is closer to 15 than 23 in 2020 and real earnings grow at <1.5% annually.
In real terms sure......inflation is too big of a bogey to price in nominal terms.
Not sure.
Ed's writing is just as good. Some of the best analysis of the long-term market cycles I have ever read.
Unexpected Returns was written in 2005 and Probable Outcomes is due out this month. I highly recommend either/both.
The Stock market matrix is an invaluable tool. I think every investor should have a copy on their desk or wall. It really is about starting valuations.
See the full matrix here:
A confidence interval would be a good way to go about this but I also think the these longer term forecasts are more accurate then say, a 1 year forecast. We (or at least I) have no idea where the market will be in 1 year but you can make educated estimates about long-term, real returns based on current valuation level due to the markets long-term mean reverting fundamentals.