basehitz

A 'Justifiable' Time to Be More Exposed Than Normal to Equities

You cite price/peak earnings. Assuming that was the last peak, my comments are as follows:

1) we just came off a period where profit margins were at historic highs. From 1955 until recently, 5.5-7.5% was the approximate range. The last peak was 8.5%, an outlier and hence not reasonable for estimating future valuations. So knock 1/3 past earnings just to get back in the range and redraw that graph and you see it is not especially attractive now.

2) besides margins, much of that profit came from an oversized financial sector, and we know now how they put up those numbers. . . huge leverage on top of risky investments. Not gonna happen again.

3) we are now at historically high debt levels measured both as ratio of debt to national income and total debt to GDP. Using the latter ratio, we are > 300% of GDP. The ONLY time in history we were even close to this level of indebtedness was. . . ready for this? . . . 1929. The research was published by Marc Faber in 2005. He is not Dr Doom cause he's a grouch. Our national balance sheet sucks

You analyst guys need to stop looking at the last 10 years or 30 years of data and drawing conclusions. By many measurements, we are in unchartered territory. And Mr. Obama can try all the programs he wants, if the Chinese and others don't buy our debt in increasingly outrageous proportions, we are really screwed.

Now for the good news. All this money printing is gonna cause something to happen. Assuming we don't get financial Armageddon and demand at least stabilizes, commodities especially energy seems like a safe place to hide, and probably fairly soon. Today I bought some UNG. If oil continues to get hammered and I'll add USO.

But US stocks, be careful.