Posts Tagged ‘Hussman’

Hussman on Misallocating Resources, Market Valuations, Earnings Estimates, and Public Policy

Hussman on Misallocating Resources, Market Valuations, Earnings Estimates, and Public Policy

Courtesy of Mish

Once again John Hussman has written an excellent weekly column. This week, in Misallocating Resources, Hussman talks about stock market valuations, PE ratios, bailouts, and other things.

Let’s start with a look at stock market valuations.

Market Valuations and Earnings Estimates

From Hussman…

On a valuation basis, the S&P 500 remains about 40% above historical norms on the basis of normalized earnings. The disparity between our valuation assessment and the putative undervaluation being touted by Wall Street analysts is so great that a few remarks are in order. First, virtually every assessment that "stocks are cheap" here is based on the ratio of the S&P 500 to year-ahead operating earnings estimates, and often comes with a comparison of the resulting "earnings yield" with the depressed 10-year Treasury yield. What’s fascinating about this is that this is the same basis on which analysts deemed stocks to be about 40% undervalued just prior to the 2007 top, following which the market plunged by more than half. There’s a great deal of analysis regarding forward operating earnings that I published in 2007, but probably the most comprehensive piece was Long Term Evidence on the Fed Model and Forward Operating P/E Ratios from August 20, 2007.

Optimism is Insane

I happened to mention similar thoughts last week in a Tech Ticker with Joe Weisenthal: Mish: Say No to Stocks, Because Optimism Is "Insane"

The optimism I mentioned was in relation to earnings estimates, not trader sentiment measures such as bull vs. bear measures.

Continuing with Hussman …

When you hear analysts say that the historical average P/E ratio is about 15, you have to recognize that this is the normal P/E based on trailing 12-month earnings after subtracting all writeoffs and other charges. Forward operating earnings are invariably much higher, and it turns out that the comparable historical norm, as I discuss in that 2007 piece, is only about 12. If you exclude the late 1990′s bubble valuations, you get a historical norm closer to 11.5. The 1982 and 1974 market lows occurred at about 6 times estimated forward operating earnings.

A final observation is crucial. Current forward operating earnings estimates assume profit margins for the S&P 500 companies that are nearly 50% above their long-term historical norms. While


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Hussman Blasts Geithner, Bernanke, Keynes; Why Keynesian Stimulus Always Fails

Hussman Blasts Geithner, Bernanke, Keynes; Why Keynesian Stimulus Always Fails

Courtesy of Mish 

In his latest post, John Hussman takes a well deserved swipe at illegal Fed operations, Geithner, Bernanke, and Keynesian stimulus.

Please consider a few snips from Implications of a Likely Economic Downturn.

…. With regard to "stimulus" plans, my difficulty with last year’s policies is not so much an aversion to government spending as it is a rebuke of the notion that government spending is by its nature stimulative or beneficial to the economy. The issue is how this real value is used. Is it used to advance socially useful outcomes which private individuals, through some failure of coordination, could not achieve? Or is it used to defend bondholders, industries, and institutions with which the policymakers are most closely aligned?

The Keynesian view is that government spending is simply a monolithic letter "G." Keynes cared little about the productivity or lack thereof to which public resources were devoted, even writing " If the Treasury were to fill old bottles with bank-notes, bury them at suitable depths in disused coal-mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again… there need be no more unemployment." The only difference between Keynes and Tim Geithner is evidently that Geithner prefers to place the bottles a bit closer to Wall Street.

…Meanwhile, I continue to believe that both Bernanke and Geithner’s hands should be tied quickly. If we have learned anything over the past 18 months, it is clear that these bureaucrats can misallocate an enormous quantity of public resources with mind-numbing speed. The diversion of public resources to the bondholders of failing financials – to precisely the worst stewards of capital in society – is not stimulative, but ruthless. A second economic downturn should encourage the repudiation of the policies that Bernanke and Geithner pursued during the first.

Basic ethical principle dictates that policy makers should not burden ordinary Americans to pay the losses that well-informed bondholders voluntarily took when they lent money to failing institutions. From my perspective, it is urgent to recognize that Fannie Mae and Freddie Mac obligations are not legally obligations of the U.S. government, that its backing was always at best implicit, and that even the Treasury’s distressingly generous 3-year promise


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Zero Hedge

A Defiant Mark Zuckerberg Says "We're Not Gonna Change Our Policies" As Advertisers Will Be "Back Soon"

Courtesy of ZeroHedge View original post here.

As the advertiser boycott of Facebook grows, CEO Mark Zuckerberg advised his employees that he intends to defy the crackdown, and expects companies that pulled advertisements off the social media platform to be back "soon enough."

As The Information reports, Zuckerberg gave his thoughts on the boycott, which now includes large brands like Starbucks and Coca-Cola, during a video town ...



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Phil's Favorites

Which drugs and therapies are proven to work, and which ones don't, for COVID-19?

 

Which drugs and therapies are proven to work, and which ones don't, for COVID-19?

We are slowly figuring out which drugs and therapies are effective against the new coronavirus. Anton Petrus / Getty Images

Courtesy of William Petri, University of Virginia

I am a physician and a scientist at the University of Virginia. I care for patients and conduct research to find better ways to diagnose and treat infectious ...



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Biotech/COVID-19

Which drugs and therapies are proven to work, and which ones don't, for COVID-19?

 

Which drugs and therapies are proven to work, and which ones don't, for COVID-19?

We are slowly figuring out which drugs and therapies are effective against the new coronavirus. Anton Petrus / Getty Images

Courtesy of William Petri, University of Virginia

I am a physician and a scientist at the University of Virginia. I care for patients and conduct research to find better ways to diagnose and treat infectious ...



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ValueWalk

FedEx Corp.: Fundamentals Support the Price Increase

By F.A.S.T. Graphs. Originally published at ValueWalk.

Introduction

After reporting better than 4th quarter results on Tuesday, the stock price of FedEx Corporation (NYSE:FDX) has been on a tear. With this article, I plan to demonstrate that the fundamentals support the current price rise. Moreover, the fundamentals also suggest that it is not too late to take a long-term position in this leading air freight and logistics company.

Q1 2020 hedge fund letters, conferences and more

Yesterday, FedEx reported a surge in quarterly adjusted earnings of $2.53 per share compared to expectations of $1.52 per s...



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Kimble Charting Solutions

Gold / Dollar Ratio Sending Bullish Message To Gold Bugs!

Courtesy of Chris Kimble

It’s been a good year for gold bugs!

Gold has outperformed several asset classes as volatility and general economic uncertainty have come back to the forefront.

In today’s chart, we look at the ratio of Gold to the U.S. Dollar on a “monthly” basis. Gold bulls want to see this ratio trending higher… and it is.

In fact, the rise has taken the Gold ratio to an important juncture. It is working on a dual breakout at point (2).

Thus far, price is well above horizontal resistance marked by (1), and just above trend resistance at (2). Should the breakout hold, it would be historically bullish for Gold (and precious metals). Stay tuned!

This ar...



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The Technical Traders

Long-Term Consumer Discretionary Winners

Courtesy of Technical Traders

I was live on TD Ameritrade TV talking about consumer discretionary, staples, and utility sectors. Explained is a unique crossover on how some discretionary stocks are also becoming a consumer staple.

Get My ETF Trade Signals, Entry, Targets, and Stop Levels – CLICK HERE ...

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Chart School

US Dollar with Ney and Gann Angles

Courtesy of Read the Ticker

Where is price going, is there strength or weakness in the chart?


Previous Post on the US Dollar : Where is the US Dollar trend headed ?


The question is always what will the future price action look like ?


This post will highlight the use of lines generated by angles. Not trend lines, as trend lines require two known points on a chart, where as angles require only one known point and a angle degree to draw a line. The question then becomes how is the angle degree determined.



There are two theories: ...

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Lee's Free Thinking

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

 

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

Courtesy of  

The COVID 19 pandemic is, predictably, worsening again in much of the US. Only the Northeast, and to a lesser extent some Midwestern states, have been consistently improving. And that trend could also reverse as those states fully reopen.

The problem in the US seems to be widespread public resistance to recommended practices of social distancing and mask wearing. In countries where these practices have been practi...



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Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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