Posted on 10/09/2008 2:52:44 PM PDT by maccaca
The markets are extremely oversold, but it can't muster a rally. Why not? The Fed is doing everything it can; ...
While many are expecting a rally, and some are in fact buying modestly right now, there are other problems.
... 2) But there's a bigger problem: there is no "E" in the P/E. In English, there is no Earnings in the Price/Earnings Ratio.
Look at the estimates now: S&P 500 price is 975; many estimates of earnings for the S&P 500 for 2009 are around $75 for the index.
Do the math: 975/$75 = 13 x earnings. Now, this is modestly cheap. The historic average is 15 x earnings, so 13 x is a little cheap, but not much.
Here's the problem: that $75 estimate is baloney. No one has a CLUE what earnings will be. All we know is they keep dropping.
So the Street is re-jiggering the numbers. Instead of $75 earnings, let's assume, say, $60 earnings. In order to get to a level where the S&P is cheap (13 x earnings), we have to go to 800 on the S&P: 800/$60 = 13.3 x earnings. 800 on the S&P??? Gads, it's at 975 or so now, that's a drop of...another 175 points....1,700 points on the Dow! Sobs and wails.
Per Journal article yesterday, the mutual funds would ordinarily have started buying, but can’t since so much money is being withdrawn.
Based on average growth from 1950-1980, the S&P should be at around 820 today.
Don’t confuse everybody with economics fundamentals........!
if we could lock in the dow at 7,000 now...I’d do that deal. Sounds like a winner to me.
October is historically pretty bad...but...geez...this is just way bad
DJIA has now lost close to 40 % from its 52 week high. Anyone who did not sell has lost close to half of their stock portfolios value.
Doesn’t help that the ban on short selling was removed.
If the naysayers would just shut up, there is no limit to how much we can get for a tulip bulb!
But this sellout has affected all stocks.
You can get good electric utilities at 8 times earnings paying 6% dividend. Do you think people will stop using and paying for electricity? How about oil companies at 6 times earnings? I don’t see any empty roads yet.
That is until the Obama Capital Gains Tax Increase of 2009 gets passed by an overwhelming majority in both Chambers. Then I'm thinking more along the lines of 5000.
Once the healthcare and oil industries are nationalized in early 2010, look for the Dow to fall to under 2000 shortly before all privately owned assets are seized and Wall Street is ultimately shut down.
Hard to put much stock in these gurus given how they missed the boat on this collapse. Economists are great at explaining things afterwards and terrible at predicting things.
Looks like losses are going to bury gains, so an increase in tax rates will net less than nuttin. A raise in the rate will lengthen the time at the bottom, while funds will have gone elsewhere to find opportunity.
Also look at the pipeline MLP’s.
They complicate your tax return somewhat, so look into what that complication entails for you, but the MLP’s are paying 9%+ right now.
And, just as you say about utilities.... people ain’t gonna stop using natural gas, gasoline, diesel or oil.
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