Oregonrain

Second-Guessing Buffett's November Bottom Call

I like the comments of Patvano. But, to boil this down..who is Peter Cooper? Sorry Peter...but if you are going to provide "color" on what one of the greats is saying..at least get the date and the place of publication right, nough said.

Inflation Fears Are Overblown

I tend to agree with the comments of Mr. Hart. I think the argument in the article are very mainstream really. I like the article for sure. But, what he is saying is look at the "core rate of inflation." That is exactly what the Fed is doing.

I think if you look at the global situation inflation seems to be taking root around the world. I am not sure of the manner it is happening (not that smart) but it looks to me as if we are exporting our inflation to the emerging markets somehow. Any rocket scientists wish to comment on this idea?

I think the deflationary issue is interesting. If I look at what is happening we have clear inflation in the commodity sector (inputs) but many manufacturing businesses or ones that are capitally intensive are saying that they cannot pass those costs along. So..this means to me that there is only one place that they can come from and that is profits.

That indicates to me that many stock prices are going DOWN. The exception will be the (non financial ) service sector which will be more impacted from wage increases which the article correctly states are stagnant at best. Then we also have the downward trend in housing (which maybe just maybe ) we are seeing some slowing in the rate of decline.

Put it all together and what we need is the "Goldilocks's FED." I am not sure they have it in them but we are on a tight rope that many people do not even seem to understand we are on.

Lost Decade for Stocks?

I just looked at another analytical argument that we could be in a "lost decade for stocks." In essence what these people argue is that two things really drive stocks. That is real GDP and PE ratios PE ratios they argue are largely driven by inflation and inflation expectations. In a nut shell if you think that inflation is headed up...then PE ratios which are still high are going to come down. This makes the argument for a "lost decade."

I may have messed up their argument but check it out for yourself here. I have no connection with these guys at all. Just saw them mentioned in a WSJ article. crestmontresearch.com

Here is the mention in the WSJ

Ed Easterling, president of Crestmont Research, argues that record increases in earnings and profit margins in recent years make prices look artificially cheap. He prefers to look at the 10-year trends in earnings, from which he removes the impact of inflation and smooths out the short-term ups and downs in profit margins. That, he contends, provides a cleaner picture of stock valuations.

I would be interested in comments on this...and what they are saying along with our friends from bespoke