tag:blogger.com,1999:blog-6616959642391988608.post5650103067296670551..comments2024-03-28T00:18:25.641-07:00Comments on Calafia Beach Pundit: Corporate profits are fantastic—what's wrong with equity prices?Scott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comBlogger23125tag:blogger.com,1999:blog-6616959642391988608.post-49719877641683921802011-08-29T11:36:45.221-07:002011-08-29T11:36:45.221-07:00Mr. Grannis, there is a Value Line long term chart...Mr. Grannis, there is a Value Line long term chart (I have a copy of it up through 2005, or so), that shows annual performance in a number of metrics, bond yields, dividend yields, inflation, Dow Jones average, etc.). It is along the lines of Junkyard_hawg1985's link, kind of an 'all inclusive' chart/graph. I'm sure with your contacts inside finance and economics, you might be sgt.red.blue.redhttps://www.blogger.com/profile/08132657702786638326noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-57898043419354442652011-08-29T07:30:03.952-07:002011-08-29T07:30:03.952-07:00There is also the investing trends at play here. ...There is also the investing trends at play here. The market comes and goes in cycles with the P/E expanding and contracting depending upon market sentiment. Crestmont Research has put together what I consider the <a href="http://www.crestmontresearch.com/docs/Stock-Matrix-Tax-Exempt-Real3-11x17.pdf" rel="nofollow">single best stock chart of all time</a>. It has all of the stock returns (Junkyard_hawg1985https://www.blogger.com/profile/18114117558513498514noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-79228140055011050292011-08-28T15:46:58.172-07:002011-08-28T15:46:58.172-07:00Perhaps the largest increases in corporate profits...Perhaps the largest increases in corporate profits are occurring in publicly traded corporations that are not included in the S&P 500 and in privately held corporations; e.g., Facebook. Early 2011 forecasts for S&P profits were about $95 EPS. Today's PE ratio of ~12X for the S&P 500 reflects a reasonable discount of a likely decline in those profits due to weak 2H guidance from Rickhttps://www.blogger.com/profile/07767085539237536998noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-34713810215281433482011-08-28T12:01:22.676-07:002011-08-28T12:01:22.676-07:00These 19 comments are the best I have ever read, t...These 19 comments are the best I have ever read, the best. Mr. Grannis, you have one hell of a following here.NormanBhttps://www.blogger.com/profile/05986709079442388236noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-16224500768109341602011-08-28T10:34:39.333-07:002011-08-28T10:34:39.333-07:00William, just to be clear to WHICH WEB quote I was...William, just to be clear to WHICH WEB quote I was referring...Carol Loomis Buffett Fortune interview.<br /><br /><br /><br />"Let me summarize what I've been saying about the stock market: I think it's very hard to come up with a persuasive case that equities will over the next 17 years perform anything like--anything like--they've performed in the past 17. If I had to pick the sgt.red.blue.redhttps://www.blogger.com/profile/08132657702786638326noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-18983583045832950302011-08-28T06:19:53.068-07:002011-08-28T06:19:53.068-07:00It seems to me that the answer to the TTM PE conun...It seems to me that the answer to the TTM PE conundrum is fairly obvious. Corporate profit margins, and the share of capital relative to labour, are both at record highs. Unfortunately for stock market investors, these two ratios are the most mean-reverting ratios in finance. Thus, profit margins are peaking (or have peaked), and are set to decline for the next 10 or 15 years.<br /><br />GestaltUhttps://www.blogger.com/profile/15636551868375563464noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-18809196393086192422011-08-27T10:54:00.626-07:002011-08-27T10:54:00.626-07:00Re: "normalized S&P 500" It's si...Re: "normalized S&P 500" It's simply the S&P 500 index multiplied by a number that best aligns the result with capitalized economic profits over the years. The factor I'm using is approximately 12.Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-77725925045186489192011-08-27T10:17:37.807-07:002011-08-27T10:17:37.807-07:00@mmanagedaccounts:
"How much longer will thi...@mmanagedaccounts:<br /><br />"How much longer will this strong economic growth last," I asked him. His reply, "It will last as long as the American people are more converned with the growth of wealth than they are with the distribution of that wealth."<br /><br />I guarantee you, the vast majority of American people, the non-managerial private sector workers that make up Johnhttps://www.blogger.com/profile/06365403570563730880noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-9633009097874127272011-08-27T09:17:30.877-07:002011-08-27T09:17:30.877-07:00It was in 1995 I was having a telephone conversati...It was in 1995 I was having a telephone conversation with Robert Goodman, Chief Economist at Putnam Investments in Boston. "How much longer will this strong economic growth last," I asked him. His reply, "It will last as long as the American people are more converned with the growth of wealth than they are with the distribution of that wealth."mmanagedaccountshttps://www.blogger.com/profile/08188469703346980431noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-56274595511282246932011-08-27T08:13:49.283-07:002011-08-27T08:13:49.283-07:00sgt.red.blue.red said..."Scott. a couple of t...<b>sgt.red.blue.red</b> said..."Scott. a couple of things<br /><br />Warren {Buffet} said at beginning of 00's stocks would return 6 percent annually over the next twenty years."<br /><br />Actually Buffet said <b>10 years</b>. In the 3rd week of October 2008 Warren wrote an Op Ed in the WSJ stating that his personal investments had been in US Treasures but with the sharp stock Williamhttps://www.blogger.com/profile/04418491109912775561noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-31839740557911924942011-08-27T06:19:53.246-07:002011-08-27T06:19:53.246-07:00"The investing public has been driven out of ..."The investing public has been driven out of equities by the volatility. What's left are traders gaming a system with increasingly sophisticated platforms"<br /><br />John's right. The game has changed and the small investor is in a bind. <br /><br />Hedge funds and HFT have wreaked havoc on the markets. They don't think about the future; they buy and sell stocks in seconds.Johnhttps://www.blogger.com/profile/06365403570563730880noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-38910678230599127392011-08-26T19:09:25.118-07:002011-08-26T19:09:25.118-07:00In my 70 year old opinion, John is spot one. I hav...In my 70 year old opinion, <b>John</b> is spot one. I have been making the same argument for the past two years. The present reminds me of the mid to late 1970's after the horrific bear market of 1972 to 1974.<br /><br />About 1976 Newsweek or Time featured a classic cover story entitled: "The End of Equities". It was a buy signal for the 4th quarter of the 20th Century.<br /><br />Williamhttps://www.blogger.com/profile/04418491109912775561noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-88739174974870595662011-08-26T18:01:44.648-07:002011-08-26T18:01:44.648-07:00Stocks are a claim on a very LONG TERM stream of c...Stocks are a claim on a very LONG TERM stream of cash flows. Corporate profits, just like all businesses, go through up and down cycles. Therefore, using P/E ratios based on one year profits, especially when margins are peaking, is pretty useless. That's why the Shiller P/E based on 10 year earnings is so much better with superior predicting power. Besides, the past decade has been the most Pragmatic Investorhttps://www.blogger.com/profile/08952759176339628535noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-8577694504441824612011-08-26T17:39:36.963-07:002011-08-26T17:39:36.963-07:00Scott. a couple of things
Warren said at beginnin...Scott. a couple of things<br /><br />Warren said at beginning of 00's stocks would return 6 percent annually over the next twenty years. 15.6x is 6.4% earnings yield.<br /><br />If the 15.6 is the average over time as you say, then there are periods above and below the average. From '82 to '00 the annual return for equities was in excess of 15 percent per annum.<br /><br />This sgt.red.blue.redhttps://www.blogger.com/profile/08132657702786638326noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-25982227819858744552011-08-26T15:33:54.092-07:002011-08-26T15:33:54.092-07:00You wrote:
The chart above represents the PE ratio...You wrote:<br />The chart above represents the PE ratio of all corporate equities, using a normalized S&P 500 index as a proxy for the "P" and the National Income and Product Accounts tally of after-tax corporate profits as the "E."<br /><br />What is a "normalized S&P 500 index" in this context? Is it some average value?<br /><br />Thank you.Comicnosehttps://www.blogger.com/profile/17638518966795341909noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-31434285806228883632011-08-26T14:34:00.029-07:002011-08-26T14:34:00.029-07:00could a and b not define the universe of answers? ...could a and b not define the universe of answers? perhaps its c: profits being high is not stictly correlated to equity prices; equity prices may discount other factors as well.septizoniomhttps://www.blogger.com/profile/14253705209662419429noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-70150948049779038372011-08-26T14:22:03.936-07:002011-08-26T14:22:03.936-07:00I think one of the key reasons the data looks a li...I think one of the key reasons the data looks a little different is the measuring system. In 2Q11 (Table 12 of today's release), corporations earned a net of $437.9 billion in profits overseas. This skews the number relative to GDP as overseas profits help U.S. companies, but will not be reflected in the GDP results. If you remove the money from overseas sources, the data will look more Junkyard_hawg1985https://www.blogger.com/profile/18114117558513498514noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-50017097738452123812011-08-26T14:21:47.096-07:002011-08-26T14:21:47.096-07:00The corporate profits numbers are
truly stinning t...The corporate profits numbers are<br />truly stinning today and lost in<br />the news...look at the S&P 600<br />versus Corporate profits ( the national accounts number)over the last 60 years...stocks are undervaluedbroderohttps://www.blogger.com/profile/12296214283216386700noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-78909019134370940772011-08-26T13:59:27.936-07:002011-08-26T13:59:27.936-07:00PS I like dividend stocks that can almost prove th...PS I like dividend stocks that can almost prove they will maintain their dividends.Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-48506098040154562032011-08-26T13:58:09.319-07:002011-08-26T13:58:09.319-07:00Investor confidence.
Bernanke said in his Jackson...Investor confidence.<br /><br />Bernanke said in his Jackson Hole speech that our national budget process is the Gong Show, and so people lose faith in the USA. Add to that a major presidential candidate (Perry) suggesting we execute our Federal Reserve Board chairman. <br /><br />If you were a foreigner, would this theater of the jackanapes encourage you to buy American? Foreigners are Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-26521964515685478912011-08-26T13:54:03.821-07:002011-08-26T13:54:03.821-07:00The investing public has been driven out of equiti...The investing public has been driven out of equities by the volatility. What's left are traders gaming a system with increasingly sophisticated platforms and products designed to enhance price changes, institutions employing machine gun buying and selling to capture pennies per share movements, rumor mongering over 'black swan' events with little more than opinions backing the fear Johnhttps://www.blogger.com/profile/11652253509768573561noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-87711238906293079502011-08-26T13:37:57.125-07:002011-08-26T13:37:57.125-07:00Scott,
Not related to this topic, but I wanted to...Scott,<br /><br />Not related to this topic, but I wanted to thank you for your excellent blog.<br /><br />I was once a Keynesian (I can hear the hiss and boos now), but was disillusioned with the failure of the Obama stimulus. After reading your blog, I'm now an avid supply sider.<br /><br />Just wanted to thank you for your great blog, detailed analyis, and advice. Wish you the best.FriendFromTheNorthhttps://www.blogger.com/profile/04830726195389467373noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-45597241740048719392011-08-26T13:14:31.455-07:002011-08-26T13:14:31.455-07:00Great comment on valuation. I find that the Real G...Great comment on valuation. I find that the Real GDP trend(3.04% past 25yrs) combined with the 12mo Trimmed Mean PCE(Dallas Fed core inflation measure)is the quasi-Holy Grail for market capitalization rate on the long term SP500 mean earnings trend line which is $71.50 today or when capitalized 1560 for the SP500. The market does not react to the under/over valuation due to market psychology, butseekingtraceevidencehttps://www.blogger.com/profile/02479493983076211876noreply@blogger.com