Yohei

Bad Now? It Was a Lot Worse in the Early '80s

From the S&P website, there is a list of quarterly S&P500 trailing 12 month earnings per share from 1997 through 3rd quarter 1982:

09/30/1982 8.88
06/30/1982 7.74
03/31/1982 7.56
12/31/1981 7.98
09/30/1981 7.61
06/30/1981 8.74
03/31/1981 9.33
12/31/1980 9.16
09/30/1980 8.57
06/30/1980 7.65
03/31/1980 6.68
12/31/1979 7.26
09/30/1979 7.47
06/30/1979 7.36
03/31/1979 7.64
12/31/1978 7.79
09/30/1978 8.86
06/30/1978 8.51
03/31/1978 8.17
12/31/1977 8.73
09/30/1977 9.01
06/30/1977 9.64
03/31/1977 9.76

I rather believe we will see this sort of pattern again.

The most realistic S&P500 earnings for 2009 I've seen is $28. At a P/E of 10 we are looking at an S&P500 of 280. If the future holds five years of S&P500 P/Es of less than ten, and we figure that 2016 S&P500 earnings are $500, then we should expect the S&P500 to be between 250 and 500 during those years. It is reasonable to expect that in the nearer term the numbers will be on the lower part of the range.

Bank Reprivatization After Paulson

The Federal Government cannot be sued unless the Federal Government consents. Sovereign immunity, they call it.


On Feb 17 12:04 PM Ranchr wrote:

> BAC would be in a far better position had the "government" not held
> a shotgun to Ken Lewis' head. Countrywide is Lewis' mistake but Merrill
> was the United States government's fault. Bank of America would be
> in fine shape if it hadn't been for the government and now the shareholders
> of Bank Of America pay the price.
>
> I'd be lead plaintiff in that class action against the feds and the
> $455 million the Feds had to pay, last year, was the largest in history
> and would pale in comparison to the penalty of that Fed action.
>
>
> "Go ahead make my day!"

G7: In Denial and In Need of a Leadership Bailout

Geithner and Summers rode to power on Robert Rubin's coat tails. The Obama administration simply could not be more saturated with Big Investment Bank influence. Volcker has been sidelined.

Either Obama is in way over his head or he is in cahoots with the gang that made this mess. Since I don't see how Obama could be as incompetent and clueless as the first alternative implies the second is highly likely.

State of Macroeconomics Is Dismal Once Again

I have an old friend who is a professional economist in academia. He is a fine gentleman. These days he is pretty high up in the field.

We very rarely talk economics. There is no real point. His field is totally divorced from my interests. I am obsessed with how things actually work and excursions to Never - Never Land are not personally interesting.

In any case relying on academically trained economists for advice and action in our present situation is futile and foolish. You might as well consult a theologian (theology has much in common with economics) or even an astrologer. Well, maybe not an astrologer!!!!!!!!!

Middle Classes at Risk of Slipping Back into Poverty?

Don't think so.

Instead we will see a return to ethnic centered political views, "racist" scapegoating, and "ethnic cleansing" (to borrow moribund propaganda cliches). There is a reversion to the mean in all human things, and "Us" vs. "Them" has been the uninterrupted human story. Even in the land of "E Pluribus Unum" even in recent times. Even today.


On Feb 16 12:35 PM bobbobwhite wrote:

> This article makes me speculate and ponder perhaps who the most successful
> people might be who will live on this earth for the remainder of
> its time: I think it will be the internationally flexible types who
> are able to see the future much better than others, and as a result
> will relocate from one developing country to the next one in the
> fat cycle of its economic growth, as these countries will rise and
> fall in their economies faster and faster over time, and those prescient
> people wise enough to see these cycles developing and playing out
> will enjoy the best of good times in each country until it appears
> that it has topped out and then they will move on to the next developing
> country that is just starting its big growth phase. And, on and on.
> It could happen. Someone needs to make a movie about it.
>
> Of course, the richer the better for this to work the best. So, get
> busy. Time is wasting.

How the Crash Will Reshape America

Just finished the "The Atlantic" piece. Most definitely written from a New York City perspective. I would call it insular and parochial. Reminds me of why I disliked New York City so and why I have never regretted leaving.

I recollect looking at the Manhattan skyline from Brooklyn in 1968 and thinking that across the river was the most target rich place imaginable. I remember musing over the possibility of some disaffected small group using an airliner in just the way we saw the Trade Center destroyed.

Not America, not at all.

Can the Government Pay as Bond Buyers Demand Higher Yields?

Very interesting essay.

Your American Scientist link also very interesting. It strongly implies that bad debt has to be written off before "stimulus" works. The current "screaming" for "stimulus" is then the rich attempting to preserve the value of their assets which are mostly debt.

Makes much sense, have to mull this one over some.


On Feb 16 01:06 PM joe magner wrote:

> there is little or no real money in the system. this is not good
> or bad but represents how money is created and distroyed in central
> bank economies. money is never burned or shreded, it all is represented
> on balance sheets. Money is loaned or spent into existence (governments
> can either borrow or print) by governments or by banks/loan companies.
>
>
> this is the cycle of money. money is saved or invested on the books
> which it then spent or loaned out to produce gdp and the entities
> who get the profits save or invest back to the system so it can be
> loaned out again. there is no real money only promises on paper of
> future returns or payments.
>
> money exists out in the system between being loaned out and repaid
> or when it is withdrawn from investments.....to be spent or circulated
> back.
>
> when no money is loaned or spent then no money exists to be circulated.
>
> if everyone tried to cash out there would be no money to do it.<br/>
>
> the goods and obligations purchased with money are not money and
> can be used in the system to live and be serviced by others.
>
> bartter works in non central bank system and outside central banks
> because other forms of obligations other then cash or checks can
> be used.
>
> the total amount of debt is kept track of by accountants as is the
> total obligations of investment and these, which constantly accumulate
> interest, can exist as long as the velocity of loan/spent money is
> large enough. the works until the velocity can no longer be sustain,
> i.e. not enough loans/spending, then interest payments take hold
> and dominate and the the downward cycle of creation of goods and
> services contract in a self reinforcing pattern until enough debt/intestest
> and invetment/interest and the accumulated profits or losses are
> cancelled out. when the level of that distruction/unwinding has become
> large enough, the velocity of money creation can become high enough
> to reverse the bifrucation and hystersis and the self-reinforcing
> spiril will disipate and an upward spiral can begin again.
>
> stopping this type of bifracation is not possible by central bank
> manipulation of interest rates at all and the Keynsian economic spending
> makes sense to stop the cycle near the bottom and restart because
> creation of goods and services are an important part of the environment
> where loans/spending work together to create a money velocity which
> creates the upward spiral of money velocity and goods/services together
> until the interest/investment return become large enough to again
> strangle and cause the bifrucation.
>
> when all is spiraled down, the goods left during the upward spiral
> are still there for starting again. that is the reason building infrastructure
> pays off...not JUST the JOBS..but the physical infratstructure that
> makes creation of goods possible.....and why Keynsian economics works
> AFTER the winding and not BEFORE the unwinding is completed/
>
> The unwinding has to take place FIRST because any money spent will
> be used to settle debts of interests and those have to be cancelled
> first.
>
> The Obama spending package is too early and what we should be spending
> money for is to protect the innocent citizens and the infrastructure
> we have. Health Care would be good as well as retaining the Education
> system and Roads and Electrical Grid........tax cuts are a TOTAL
> loss as they help stop the spiral that needs to complete for the
> unwinding.
>
> The Economic Gap of Wealth/Money is implicit in the above and the
> above ideas work through time before central banks. there was an
> article in the American Scientist in 2002 by Brian Hayes called 'Follow
> the Money' which gives some ideas about how certain economic games
> end and what can help them continue. there applications here but
> central bank economies are a bit more complicated.
>
> www.americanscientist....
>
> cheers - the bad times are the best times for change....both good
> and bad...so we need to be ready.
>

The Weird Science of Recessions

Agreed on the demographics angle.

The Census web site notes that the median age of Americans is now over 45 and won't go below that until about 2035. Keynes' "animal spirits" will be in short supply.


On Feb 16 01:00 PM freddyv wrote:

> One of the big data points too often ignored by economists is demographics.
> Post civil war saw terrible demographics because of the large number
> of people killed duing the war.
>
> Currently we are also in a terrible demographic situation, one that
> will only drag our economy down, or at least slow growth, for probably
> two decades.

Five Criteria for Timing the Market Bottom

Agree.

This one will be at least as bad as 1980-82, where we saw several quarters of S&P 500 12 month trailing earnings/price ratio in the 8's.


On Feb 12 09:11 AM 1werd wrote:

> I believe the bear market will be over when the following occurs:

>
> = the dividend yield on blue chip companies is over 7.5%
> = P/E ratio of less than 10
> = current debt level of individuals, businesses and governments is
> decreased dramatically.
>
> most investors will have given up on stocks and most investments
> in general. It took several decades to get to this point and it
> does not seem realistic that it would be over after one year. The
> main reason being investor confidence has been shattered and it seems
> apparent that it will take a lot longer than one year to rebuild
> that confidence.

Way Too Much Washington for Wall Street Today

Don't have any use for Geithner, or Summers, or Obama for that matter. People looking to Washington for anything but politics as usual are going to be disappointed.

The situation is simple. We are plagued by bad debt. Many large banks are insolvent by any rational standard. Let them go bankrupt. Let all the guys holding their CDS go bankrupt. We have got to get out of this mess and surely will not with more make believe.

The Next American Revolution: Main Street vs. Wall Street

No, I don't think it would make the government think twice. I have see war fairly close up and a few riflemen are no problem no matter what a romantic may believe. Even simple curfews enforced by ambush plus a bit of bulldozer work in the Israeli style would probably be enough. Artillery fire on sniper positions works well also especially in urban situations. Examine the recent Israeli operations in Gaza.

On Feb 03 01:03 PM GeminiAtlas wrote:

> Anarchist,
> An effective snip...er, I mean "hunter" could pin down a whole platoon.
> And there are millions of deer rifles (with scopes) in the hands
> of average american citizens. Think Sarajevo. You don't think that
> might make the powers-that-be think twice?

Global Sovereign Bond Watch: Overstuffed Supply

Very good. Now is certainly a time when one needs to examine the situation from first principles.

Perhaps another way to look at what you say is that an "investment" is not an investment until after it is sold profitably; until then it is consumption.


On Jan 30 05:51 AM TheBookkeeper wrote:

> "Global sovereign bonds are just another asset competing for capital."
>
>
> Could today be a wise time to refresh our understanding of the word
> "capital," in the context of commercial trade? It's binary complement
> for centuries has been "cash." An artifact of value is brought to
> the marketplace and sold by a debtor to a creditor. The debtor in
> the trade receives "cash" as the "value" of the artifact in trade.
> The creditor who paid out the cash, receives in exchange "capital-potential."
> Capital's potential is an expression of rights to ownership of the
> artifact. Capital's expressed value will gain or lose real value
> in future trades. When money is the artifact in trade, the creditor
> is betting on the paper, or the gold, or the oil having real value
> in return for potential value spent in a future trades. Capital that
> has expressed potential value of one sort is seeking real value in
> trade by purchasing capital of different sort. "Money in the bank,"
> has a whole new meaning in today's world as potential gets removed
> further and further from physical assets with real value. Sometimes,
> in changing times, it is helpful to go back to basics and to rethink
> what one thinks they already know.

Gold and Silver - Perhaps the Bugs Have the Wrong Beast?

Such amazing levels of frantic emotion. I am bemused. Certainly there is no room for such indiscipline in successful investing.

Which CEO Is the Best Wealth Creator?

Shucks, I thought you were going to talk about creating wealth. You are talking about successful rent seeking, something else entirely.

Confusing the wealth and rent seeking is like confusing wealth and assets. After all, all those busted CDOs are assets on someones' balance sheet. Unfortunately, increasingly that "someone" is the taxpayer, eh?

Payback Time: Blasting the U.S. Role in the Current Economic Crisis

I am an old Viet Nam boy, and was and am proud to have answered my Country's call to arms. I would do anything to save the Constitution and the Republic.

The United States had the means to prevent this financial catastrophe. Just a little prudence, a tiny bit of adult responsibility, would have prevented this whole affair.

I remember looking at the yield curves in 1992 and thinking that this was probably the last time that the federal government had a chance to avoid a huge asset bubble followed by debt driven collapse. Then, during the Greenspan years, every attempt for natural (market) forces to correct the situation was thwarted by increasing the supply of credit - exactly the wrong thing to do. We all know how the story turned out.

With ability comes responsibility. We could have easily prevented this but didn't. Putin and Wen have more the right of it than we do. I wish it weren't so.

We must accept what responsibility is ours. Otherwise we are not free men but fools. We must seek, recognize, and accept the truth if we are to preserve out honor.