E.D. Hart

A Dow Double in 10 years? Easy

Check out graphs of the Nikkei falling from PE of 80 in 1989 to less than 15 today. Earnings rose at a un-constant rate over the last 20 years--but due to debt deleveraging--the PE fell by more than 2/3.

Nikkei--39,000 in 1989 to 9,832.47 today.

Couldn't happen here right, because that's Asia--like a different planet.

But wait, housing prices don't always increase--sometimes they decrease for a decade or more. Virtually no one talked about that before the crash.

Where else did real estate crash? Japan. Prices falling for the last 20 years, more or less. Couldn't happen here though. This is America. Stocks and homes go up over the long run.

I hear this argument all the time. It makes sense.

And Its wrong. The market could (not predicting it will) be cut in half from here. Its possible to have deflation in some asset classes and inflation in others. Stocks can decrease while gold increases or vice versa. Inflation and deflation often occur simultaneously.
Hedge your bets and consider the possibility.

A Dow Double in 10 years? Easy

If you look at the ratio of Dow to gold, bear markets bottom at a ratio of 1:1. I think that Gold $5000 is possible, DOW 5000.

Markets trough at PEs of 5 or 6, not the current 16-17. We have a potentially large correction of 40%-50% ahead.

I'm not saying it will happen, only that it is possible, and historically analogous to current times.

If I had to bet a dollar I'd say DOW 5000 is more likely than DOW 20,000. Something to think about.

Citigroup Looks Overpriced

AIG was a global franchise too, but they crashed and burned on bad bets in the derivatives markets. Arguably, AIG will never return to its former glory.

The same can be said of Citigroup. There is no precedent for the current environment--its global deleveraging that will take a decade or more to work through.

There is no reason that they must return to their former glory--they may just be broken up and sold off in pieces to make up for bogus book value.


The closet analogy may be Japan and their deleveraging of their real estate and financial sectors. In 1989 3 of the words largest banks were Japanese. In 1999 none of them were. They are still recovering.

Citi may not be much different than the walking wounded Japanese banks--still recovering after 20 years. How can you value a company if the experts say you cant accurately determine the book value?

Why I'm Holding On to Citigroup Stock

There is no way to value the company realistically. Its hope over reason. Avoid this stock, unless you want to speculate.

How Wall Street Keeps Dooming Itself

Profits are privatized and losses are nationalized. Absurdly, this is exactly counter to many of the dogmatic arguments for the superiority of the US system of capitalism which is said to raise all boats.

Bank of America: Earn 6.5% While You Wait

Citigroup assured the investment community that the dividend wouldn't be cut, before they cut it.

BAC wouldnt need to cut the dividend fo the price to trade sideways. They might just not raise it for several years.

Dividend Aristocrats: Top Dividend Growers

3 of these companies are Buffett picks.