Just a quick update on the stocks I bought and some of my learnings. [more]
We have been hearing a lot of negative news about the economy. Many bears claim that virtually no company is profitable, and that the cogs of our economy are completely locked up. This sounded dubious so I tested it for myself.
I took the 4,238 stocks my system evaluates. These stocks are all US, listed, non-finance stocks. I summed up their reported net incomes from 2007, and their reported results from the last 12 months.
2007 - Total Net Income: 949,096 Million
2009 - Total Net Income: 967,278 Million
Indicating a 2% growth in earnings!
This may have been caused by a small increase in companies operating in 2009 that were not operating in 2007, and inflation. Regardless of that, we have not seen the "cataclysmic" drop in earnings that some are going ape crazy about.
2007 - The S&P 500 value on this day was: 1502
2009 - The S&P 500 value today is: 921
That’s a drop of about 39%!!!
I will be the first to agree that prices were inflated in 2007. But that drop seems pretty extreme considering the gain we have made in earnings. (You may be thinking that the S&P 500 is not representative of the group of stocks I evaluate, and I partially agree, so I let’s look at the Russell 3000).
2007 - Russel 3000 is at: 87.6
2009 - Russel 3000 is at: 53.8
That’s a drop of about 38.5%!! (Pretty much the same as the S&P 500)
So if we were to simplify the world and figure out the p/e ratios for these two years they would be:
If we assume that the average P/E in 2007 was 14, then I calculate the current P/E to be about 8.44.
In the past, higher interest rates have driven down that P/E, but we don’t seem to have that situation today. I do think that there is decreased capital available right now, which may explain this lowered P/E ratio. But, for those of us with capital, it seems like it may not be that bad of a time to buy.
I generated all these numbers from my own analysis, feel free to disagree with them or ask any questions. (I don't buy all the crap the media is feeding us, so I try to leverage my technology to do my own analysis.) Also let me know if this was interesting, so I know if this is something I should spend another Sunday afternoon creating into a post. [more]
I figured this time I would propose my picks before I buy them so I can benefit from your input. [more]
I recently responded to a blog post about Elliot Wave Theory (EWT) with a few popular criticisms of that style of investing. The style of the response to my criticisms surprised me. It actually reminded me of the type of response I have seen from religious criticism. As I learned more about EWT I began to see more and more parallels with a theological belief rather than a logical one. Although I am sure this post will draw a lot of persecuted responses from our friends in left field, I find the situation too interesting to not explore on a blog post. (Please understand that I am not questioning the efficacy of EWT, but I am using it as an example of a class of investment styles.) [more]
Just a quick follow up to the 5 stocks I reported buying 10 days ago here on caps: [more]
There has been a lot of negativity floating around these boards. Negativity about the economy, negativity about players “gaming” this game, negativity about people, negativity about negativity, and most surprisingly negativity against the free service we all benefit from here at CAPS. [more]
There have been a lot of very vocal bears prancing about these blogs lately and have remained relatively unchallenged in their dire views of our future. Let’s examine the basic song and dance of these bears: [more]
WCC, JAKK, KNDL, GRT, SBN [more]
Today is rounding out pretty good. I finally got my "Yes" man award and reached a new personal record on caps (24th highest rated member). Additionally, I am scheduled to meet with a large investment firm in Dallas to discuss my model. [more]
Lately we have been inundated with posts that whine about market manipulation causing the inaccuracy of predictions (I mean no disrespect for those who have attempted to predict the future, it is not a trivial task). We all know markets are not efficient and that reality can be suspended for short periods of time. However, we must remember that reality always wins in the long term. [more]