S&P Target 1600: Buy 'Em When They're Sleepin' And Don't Wake Me Up Until We Get There [View article]
TrufflePig, I meant please disrupt! Otherwise we will be "looking" at our navel. What was I thinking...
And I forgot about this tropical storm too. I'll clean the garage instead... Actually, I was commenting on another article by Morningstar, and I came up with another brilliant anathema. Stay posted. It's called "We can afford it!" - I really hate to say, but I am getting into the Politicians mind here, which is scarier than a Steven King script - it has to do with Public Debt relative to Househopld Net Worth - this is the way they think in Europe...
Outlook For Equities: Time To Take The Foot Off The Accelerator [View article]
Morningstar, let me counter. It's not my favorite argument, but one that is used in Europe - the people can afford it. I know, it sounds strange, bu it is the basic tenet of socialism, or even in this country, what we would call a short term solution to a crisis. Granted, this crisis is longer than usual, but we been there done that many times. The end result works pretty well.
Here is my version of "we can afford it" - just to be pragmatic, short term. It is called Household Net Worth (HNW), and Debt to HNW. From 1975 to 2000, Debt to HNW hovered in a 12.5% to 16% range. Then, with the 2003 refi boom, it went to 20%. HNW peaked on Q1, 2007, at $64.3 Trillion; the Debt ratio was 21.9%. HNW collapsed to trough in Q4, 2008, at $51.5 Trillion, with a Debt ratio of 27.6%. It took us a while, but as of Q1, 2012, HNW was back at $62.9 Trillion, and the Debt ratio to 21.3%.
Now, take the Public Debt. In three years, it has gone up by $5 Trillion. Not good. So, take it out of HNW. In 2009, with $10 Trillion,you were left with some $53 Trillion. In 2012, with $15 Trillion, you are left with $57 Trillion. Look at the Macro in the meantime. What is the only sector that can move the economic needle, in terms of job creation - Housing. Housing Net Worth is currently at $8.9 Trillion. Forget about 2007, of course, and take 2004: it was at $12.4 Trillion.
The point is, as I said in my book, a bit early I must admit, Stocks and Real Estate prices need to recover - see http://seekingalpha.co...
They have, and they are going to continue, hence the current Monetary Policy. This is nothing new: go back to Dr. Bernanke's speech on Deflation in November 2002. I will bet you this: within three year, HNW will be higher than today, and the CBO cumulative 10-year Deficit forecast will be much lower.
If I am correct, since it is the trend that counts, it looks up to me.
S&P Target 1600: Buy 'Em When They're Sleepin' And Don't Wake Me Up Until We Get There [View article]
Mobyss, interesting scenario. I need to think about the correlations, but here are my first thoughts. By my book, SnP 1600 occurs because of liquidity - money goes to financial assets faster than in the economy. The test here is the M1 Multiplier. So SnP 1600 does not mean inflation, or a substantial pick up in the economy - all it takes is some 2% growth in GDP. In this case, I don't see the corrolary with $150 oil.
Re QE, if my analysis of Household Net Worth holds, there is no need. Increasingly, it looks to me we look at the trees.
S&P Target 1600: Buy 'Em When They're Sleepin' And Don't Wake Me Up Until We Get There [View article]
TruffleIPig, I like your bio! The timing on 1600 is debatable. Clearly, the Election should have a bearing, but I am not so sure. Housing is what moves the needlle. Re Fiat, I actually own Chrysler. To me, it's a great brand, innovative in design and tech, and totally undervalued because of the Fiat stigma.
Thanks for pitching in - I hate writing these things on a late Friday afternoon. It usually ruins my week-end golf game...
Friday Fakery: $188Bn Buys You A One-Day Rally [View article]
All this will reverse when Real Estate picks up - and it is, right? Have you looked at Household Net Worth recently? And would you care to venture where the number will soon be, with stocks marching on and real estate picking up? I dubbed this the Instable Equilibrium, check it out http://seekingalpha.co...
For more on HNW and Housing, this is what I wrote on June 9th, 2011 - pretty controversial but I am happy... http://seekingalpha.co...
Start Paying Attention To The Dow Jones Model [View article]
China's slow-down is good. With inflation back to 1.8%, they will soon pick up again, and just in case you did not notice, there was no impact on Earnings from that. The hit from Europe was also well absorbed. Financial Assets Behavior 101: it's the liquidity that counts. SnP 1600 is actually conservative, and I will update depending on the Elections. At this point, 16 times $100 EPS is at the bottom of the historical 14 to 25 range of the post-war period, except for the 70's, and the recent period of risk premium. It's even totally out of the hoistorical norm when you compare the inverse of the P/E, i.e. the Earnings Yield, to the 10-Year.
6 Reasons Why Monster Stock Rally 2012 Is Right Around The Corner [View article]
Good article. We do not need more Fed printing. More ECB yes. But at the end of the day, we already have a couple of Trillion in Excess reserves in the US, and same in Europe. With a lowering of risk premiums, the portion of these reserves which up until now were kept as an extra safety net will be released - first in financial markets, second in the real economy - the test on that will be the Multiplier, still in the 2009 doldrums. When this happens, not only will we have a P/E Decompression Stampede, but also an E expansion. Rates will go up, making Stocks and Real Estate the asset of choice - the next thing you'll notice is a dramatic improvement in Household Net Worth. QED. http://seekingalpha.co... http://seekingalpha.co...
Start Paying Attention To The Dow Jones Model [View article]
I would not be surprised to see a short squeeze on IO, which I own. Also, for those who are interested, it looks like AKAM ($35.85) is about to tumble - surprising after the strong move on Q@ earnings, but that's what my Oscilator reads.
Start Paying Attention To The Dow Jones Model [View article]
Yes, I did have a great week-end! Actually, I did not want to overkill on the Model - if I run it everyday, the results will fall under the law of great numbers...- but I did sell a bit yesterday and bought some TWM at teh close, as the momentum seemed to be fading especially in the financials and, curiously in MCD and PFE. It feels like rates are about to inch up here. Now, I would like this to happen, confirming a pick up in the economy, as I am a strong believer in stocks going up when rates start to pick up. But given what I would hope to happen in November, I can't have it both ways. Hopefully the economy stays pat until then. What made my day yesterday was EXH!
S&P Target 1600: Buy 'Em When They're Sleepin' And Don't Wake Me Up Until We Get There [View article]
And I forgot about this tropical storm too. I'll clean the garage instead... Actually, I was commenting on another article by Morningstar, and I came up with another brilliant anathema. Stay posted. It's called "We can afford it!" - I really hate to say, but I am getting into the Politicians mind here, which is scarier than a Steven King script - it has to do with Public Debt relative to Househopld Net Worth - this is the way they think in Europe...
S&P Target 1600: Buy 'Em When They're Sleepin' And Don't Wake Me Up Until We Get There [View article]
Outlook For Equities: Time To Take The Foot Off The Accelerator [View article]
Here is my version of "we can afford it" - just to be pragmatic, short term. It is called Household Net Worth (HNW), and Debt to HNW. From 1975 to 2000, Debt to HNW hovered in a 12.5% to 16% range. Then, with the 2003 refi boom, it went to 20%. HNW peaked on Q1, 2007, at $64.3 Trillion; the Debt ratio was 21.9%. HNW collapsed to trough in Q4, 2008, at $51.5 Trillion, with a Debt ratio of 27.6%. It took us a while, but as of Q1, 2012, HNW was back at $62.9 Trillion, and the Debt ratio to 21.3%.
This is all in my article of yesterday, http://seekingalpha.co...
and in my book (see my profile).
Now, take the Public Debt. In three years, it has gone up by $5 Trillion. Not good. So, take it out of HNW. In 2009, with $10 Trillion,you were left with some $53 Trillion. In 2012, with $15 Trillion, you are left with $57 Trillion. Look at the Macro in the meantime. What is the only sector that can move the economic needle, in terms of job creation - Housing. Housing Net Worth is currently at $8.9 Trillion. Forget about 2007, of course, and take 2004: it was at $12.4 Trillion.
The point is, as I said in my book, a bit early I must admit, Stocks and Real Estate prices need to recover - see http://seekingalpha.co...
They have, and they are going to continue, hence the current Monetary Policy. This is nothing new: go back to Dr. Bernanke's speech on Deflation in November 2002. I will bet you this: within three year, HNW will be higher than today, and the CBO cumulative 10-year Deficit forecast will be much lower.
If I am correct, since it is the trend that counts, it looks up to me.
S&P Target 1600: Buy 'Em When They're Sleepin' And Don't Wake Me Up Until We Get There [View article]
S&P Target 1600: Buy 'Em When They're Sleepin' And Don't Wake Me Up Until We Get There [View article]
Re QE, if my analysis of Household Net Worth holds, there is no need. Increasingly, it looks to me we look at the trees.
S&P Target 1600: Buy 'Em When They're Sleepin' And Don't Wake Me Up Until We Get There [View article]
Thanks for pitching in - I hate writing these things on a late Friday afternoon. It usually ruins my week-end golf game...
S&P Target 1600: Buy 'Em When They're Sleepin' And Don't Wake Me Up Until We Get There [View article]
Friday Fakery: $188Bn Buys You A One-Day Rally [View article]
For more on HNW and Housing, this is what I wrote on June 9th, 2011 - pretty controversial but I am happy...
http://seekingalpha.co...
Start Paying Attention To The Dow Jones Model [View article]
6 Reasons Why Monster Stock Rally 2012 Is Right Around The Corner [View article]
http://seekingalpha.co...
http://seekingalpha.co...
6 Reasons Why Monster Stock Rally 2012 Is Right Around The Corner [View article]
Start Paying Attention To The Dow Jones Model [View article]
Start Paying Attention To The Dow Jones Model [View article]
S&P Target 1600: The P/E Decompression Stampede - Part VI [View article]
Start Paying Attention To The Dow Jones Model [View article]