Friday, May 22, 2009

But The Market Is So Cheap

I think I must have read or heard the title of this post a thousand times over the last four years or so. The social conditioning of this nontruth was very intense.

One of the things we talked about while Wall Street was telling us how cheap stocks were is that we were in a massive earnings bubble. So how can there be two totally different perspectives on the same topic? There aren't. There is only one. It is called reality. The data doesn't lie. Only people do. Or, only people are uninformed or prone to misinterpreting reality, better known as delusional. And we are all prone to it.

The earnings bubble is obviously popping. (Not done.) And make no mistake about it, future earnings aren't going to be anywhere near this cycle's peak for a long time. So while S&P will tell you the market's price to earnings ratio is about 13 today, the reality is quite different. Why this isn't talked about in the mainstream press is beyond me. Maybe the press or Wall Street doesn't want to incite horror in the general public. (This is also why I don't use S&P earnings calculations. And, their book valuation metrics are waaaaay different than what I would use.)

I'll put a plug in here for I have been on their free chart list for quite a few years. I would encourage you to go to their web site and sign up.

posted by TimingLogic at 7:58 AM