"What you're now seeing is profit [sic] and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it."
End of the week news, March 6, 2009:
We read this and we think, how can we use this sterile and unsurprising information to create an overwrought and emotional blog post. Let's try this:
Stocks look cheap, but they could get cheaper; By some measures, P/E ratios are near lows, though it depends how you slice it
By Laura Mandaro, MarketWatch
Last update: 4:45 p.m. EST March 6, 2009
SAN FRANCISCO (MarketWatch) -- Price-to-earnings ratios, a popular measure of how expensive stocks are by historical standards, have surpassed lows seen in recent recessions. But that's no guarantee they won't sink further.
"There's no doubt that people can look at market valuations and determine that stocks are relatively inexpensive -- but that doesn't mean they're going to quit going
down," said Michael Gibbs, director of equity strategy at Morgan Keegan & Co. in Memphis, Tenn.
The price-to-earnings ratio of stocks in the S&P 500 has sunk to 10.6 from nearly 17 at the end of 2007, says FactSet Research. That's based on the Thursday close of the S&P 500 compared to index members' past four quarters of operating earnings, or net income excluding what analysts consider to be extraordinary charges and gains.
Thomson Reuters, which publishes similar analysis, estimates the trailing P/E ratio for the S&P 500 is around 11.
Those numbers are well below the valuations reached during the market low of the 2001 recession, when the ratio stopped at 19. They're also lower than the P/E ratio of 13 touched at the market bottom during the 1990-1991 recession, says Morgan Keegan, which used data compiled by Yale University's Robert Shiller for its historical research.
But widen out the lens, and P/E ratios dropped even further in some earlier recessions. During the market low of the early 1980's recession, for example, stocks in the index were trading at a mere 8 times earnings. "There have been periods when the market multiple [P/E ratio] traded lower. And the economy is declining at a rapid pace, meaning earnings could fall more," Gibbs said.
Sydney Brillo Duodenum recently downloaded the iDie application for his iPhone. Essentially an actuarial table showing at any given moment your expected remaining lifespan, iDie finds that SBD has used up approximately 56 percent of his life. This little application has removed any and all sense of any "long-term perspective," as the President might describe it, on anything. It's all short term from here on out. In fact, it was during a highly productive part of that first 56 percent of his life that SBD maintained "a long term perspective" on things and it is that very thing which led him to be a good egg by directing a decent percentage of earnings into nest eggs. The result? A murder of crows has made off with almost half of SBD's little chicks and an unkindness of ravens has its eyes on the remaining little bastards. Living now only in the short term as SBD does, there simply isn't any long term opportunity to get back to break even.
Someone is to blame, of course.
First and foremost, SBD is to blame because he "bought into the system" as it were. His money is locked up in goodietwoshoes, government prescribed financial investment vehicles - 401(k), life insurance, 529, etc. - all designed to minimize taxes in addition to minimizing access to hard earned money. To get it out will cost money and penalties. And then what? Thus, SBD gave up his freedom for some kind of freedom in retirement. Short term advice to the next generation: never give up control of your money.
Second, Obama is most certainly to blame for our present condition. It is absurd and obtuse to claim that he "inherited" this "crisis." He blames out of control government spending, so-called lax regulatory oversight, and capitalist greed. It was Booooooosh that did it. We know that government spending got out of control paying for things President Obama himself is now promising full sized versions of: nationalized health care, education outlays, hidden welfare; bailouts for deadbeats, statist energy policy. And yes, there certainly was a great deal of regulatory blindness, especially the kinds that allow quasi-government entities - Fathead and Frannie Fuckface - to run amok in a vital area of the nation's economy and pysche. And while it's interesting and makes allowance for stern furrowed brow speeches, capitalist greed is what funded President Obama's break the bank presidential campaign. The regime was not built on drib and drab contributions from some hempclothed fat chick with hairy underarms living in a tent under a freeway in Portland, OR. Wall Street and James Bond-type villains paid for President Obama's campaign. It was Barack Obama's "philosophy" that brought us to where we are today. Government meddling and control over market forces, government policies that pervert human action and create moral hazard are to blame. In the past 40 some days, President Obama has promised a degree of government meddling, coercion, perversion, and disruption unseen in modern times. His policies and philosophy took us to where we are today. Falsely, they indict free market principles that have never been allowed to function. Obama is now in control and promising an explicit and accelerated application of his philosophy.
People need to understand that this will not blow over. People sometimes become trapped in their own circumstance, believing it to be global and paradigm altering when it really just an isolated squall in the wide ocean. Not this. This not melodrama or middle age heat or desk draw whiskey or even sour grapes talking. It's sober fear. America is in the grip - the clenched fist - of an egomaniacal academic charlatan.
Our republic is in great peril and there is not a goddamned thing that can be done about it. It must simply play itself out in the short term. Obama will get most of what he wants. In that sense he will succeed. He will create a government chatal class, incapable of ever being a Greatest Generation. Obama's success is national failure. The Republic is dying. SBD's "long term perspective" is that in the short term, he witnesses it die.