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Profits down far more then the market

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April 20, 2009 – Comments (7)

Big Picture has a post on what happened to profits this past year, down 85%,

▪ Profits fell from $645 billion in profits in 2007, to just $98.9 billion - an 84.7% decline.

When you consider the market was priced for future profit increases this is actually much worse then it looks.  I am strongly of the option that the market was priced to high for existing profits.

Just quickly going by what I see on my CAPS the market is down in the 40-45%.

Unless one can somehow give good reasons to show profits are going to quadruple in a relatively short time frame I'd say the market is overpriced right now.  Profits need to quadruple for the market to to be fairly price, imho.

It is getting easier to see how it was that the market declined to 11c on the dollar during the depression and I think the Asian crisis was in the same range.

7 Comments – Post Your Own

#1) On April 20, 2009 at 6:28 PM, dwot (46.92) wrote:

dang, wish we could edit after we post, *option=opinion.

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#2) On April 20, 2009 at 7:11 PM, mark91055 (< 20) wrote:

Thanks...nice point

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#3) On April 20, 2009 at 8:37 PM, bmw201030 (34.67) wrote:

dwot,

 I read that article too.  I think this rally has gone way too far.  We are heading to new lows. 

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#4) On April 21, 2009 at 3:40 PM, foolsMeThrice (99.63) wrote:

if profits lose next quarter, for sure the market should correct and follow it downward.  It should correct now but it is staying tenuously aloft perhaps by artificial means.  If long term market liquidity is drying up and there is over trading by the quants, then this is just a atomic bomb developing potential energy. The quants are overleveraged versus the available market liquidity.  Somebody has to go bust and it will be ugly.

.

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#5) On April 21, 2009 at 3:41 PM, foolsMeThrice (99.63) wrote:

I see it too.  The affects of debt deleveraging haven't fully played out.  How come we never hear about the private equity story, the euphanism of leveraged buy outs?

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#6) On April 21, 2009 at 3:44 PM, foolsMeThrice (99.63) wrote:

Another note, I am value investing right now and that happens to be my target. Price to book lower than 0.1 if they have debt.  And I am steering far and clear of financials of any kind.

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#7) On April 21, 2009 at 11:03 PM, xserver (< 20) wrote:

Well take a look at this...

P/E Ratio for S & P 500 as of March 31, 2009:  52.62

 Gulp!

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