Tim Price

Markets Aren't as Benign as They Look

Not sure what "we guys" like to use as valuations - for the purpose of this piece I'm using purely stock / index level prices, let alone derivative metrics. I'm certainly not talking about homebuilder prices, as the piece itself should make clear. I agree that people will continue eating - that seems a reasonable bet. But with the unemployment rate rising fast in the Anglo-Saxon economies, and with many individuals rebuilding their own balance sheets and savings, I doubt whether personal consumption expenditure is exactly going to knock the ball out of the park any time soon.


On Aug 21 03:33 PM Deepv wrote:

> " the rally is taking valuations back toward those that pertained
> when the world was rolling orgiastically in credit"
>
> the rally has yet to take the S&P above the "panic" selling days
> of early October dude. One issue is the only valuations you guys
> like to use are P/E which is stupid because it uses only a "spot"
> in time earnings and not NORMALIZED earnings. If one looks all these
> crazy P/Es are underpinned by stocks still trading near, at, or under
> book value. If you look at SHLD for example, people scream bloody
> murder about its P/E ratio but fail to see it trades well under adjusted
> tangible book. Another way to look at this: Homebuilders share
> prices PEAKED on say 5x "E". That E was a cyclical peak. One had
> to understand that down the line that "E" would not be recurring.
> When the world prints money, asset prices will rise. In the meantime
> people will be eating and buying stuff; not only in the US but overseas
> where standard of living is rising. I really think everyone has
> lost the plot.

Don't Just Do Something, Stand There

I should now perhaps add that there are probably few things worse, in my opinion, than a fiat currency in whatever form. The US Dollar lost 98% of its real purchasing power during the last century. This crisis ends poorly, particularly for taxpayers. Happily for owners of gold, they don't pay taxes, to the extent that there is no government of Gold, and no region of Gold. When will people wake up to the broad theft of the commons that bailing out Wall Street & the City represents ?

Don't Just Do Something, Stand There

Unfortunately, Muffy, you have missed the point of my "headline". I am not advocating that investors "just stand there" - rather, that administrators (your Fed, my Bank of England) just let well alone and allow the markets to do their job. Equally unfortunately, I suspect that neither party will be able to. That leaves us, obviously, to manage our capital and portfolios as best we can ourselves.