7 Reasons the S&P Is Going to 1500
From yesterday's Wall Street Journal, by James Altucher:
"The S&P 500 may be headed downward right now, but here are seven reasons to believe it will go up. Way up."
Read the the whole article here.
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Friday, July 02, 2010
"The S&P 500 may be headed downward right now, but here are seven reasons to believe it will go up. Way up."
Read the the whole article here.
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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8 Comments:
Yes, our resilient wants to recover and grow. However, business leaders see a stronger and more powerful central governing authority. An authority that on one hand says that they want to stimulate growth. The other hand says they want to raise taxes. They promise their voters provision and the removal of risk. Instead they create an business environment of uncertainty which is defined as risk for the investor. Team Obama reveals their definition of Operational Excellence. If Obama was the whining CEO he is as POTUS, he would be fired.
Some comments at WSJ I agreed with:
1. A company, and its biggest competitor, raises its prices in the face of rising material costs. This isn't positive, it's just inflation.
2. Wow, the S&P 500 is almost at its average valuation. Get in now, and you can break even. Maybe. Sorry, not very appetizing.
3. The credit system stinks, and a whole bunch more banks need to fail to get the toxic junk off the paper. That destroys M3 and M2, and leads to deflation, not inflation.
I agree with 10% of what the author said: there are a few cheap stocks in the 500. Not Microsoft: I doubt it has 10x growth left in it (there's no growth markets left for them). XOM, Exxon Mobil, has one of the lowest profit margins in the world and is facing a global glut in oil supply and lowering demand. It's PE is 4 for a reason: it isn't going to grow a lot.
There are battles to pick, and places to be positive. Mr. Altucher isn't going to help you find them.
"We are still in the middle of an inventory rebuild after the Great Liquidation that wiped out all inventories in 2009...In fact, corporate profits at their highest levels ever"
Why would these factors be regarded as *positives* for stock purchases? Profits as a % of GDP have strong reversion-to-the-mean characteristics. Similarly, revenue/profit increases due to inventory rebuilding are by their nature transient.
Using 15x as the market's average P/E is a little misleading: that's the market's average P/E over several decades, which include both secular bull and bear markets. Secular bear markets (such as the one we've been in since 2000) typically end when the market is at single digit multiples.
The S&P will certainly get to 1500.
The two unresolved questions are:
1. Will it get to 750 first?
2. How many years will it take to get to 1500?
This article is a pretty weak response to a market which has plunged from recent DJIA high of 14000 down to below 9800. If the stock market is filled with rational players who read and believe Carpe Diem, they certainly aren't trading where their beliefs are.
I...must....post....more....optimism!
Apparently Altucher forgot that the Manchurian Candidate is now in office with a socialist agenda and allies to help him foist it off onto the citizens...
Maybe Altucher should review why Arnold Kling had 7 reasons to oppose the stimulus bill to better understand what the S&P and everyone else is saddled with...
The biggest U.S. companies are sitting on mountains of cash. Why not let them pay you dividends as a reward for owning their shares? Some are saying the S&P 500 is a screaming buy!
Go to Google Trends and search for "double dip."
You used to enjoy that game last summer.
Unless al those searches are for ice cream, you're in a lot of trouble.
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