 |
sam williams said... |
| |
RE: "The only true indicators for the market are signals originating from the market. Such signals include P/E ratios and dividend yields. A study of historic market bottoms shows that the stock market does not bottom unless P/E ratios and dividend yields reach certain levels."
I agree that HISTORICALLY market bottoms when P/E and dividends reach a certain level. However, there has NEVER been THIS much government intervention--(whether they work or not) ala fed bailouts, fed buyer's tax credits, state buyer's tax credits, stimilus this/that, jobs to rebuild infrastructure, public/private buying toxic debts, printing trillions, fed forcing interest rates to new lows, fed orchestrated stress tests with predetermined results, feds forcing the FASB to change (back) the mark-market rules, feds forcing companies to bring jobs back, etc etc.
Sure, we know that some of the stuff will work and some won't. We can also see past the facade of the stress test and the immaculate Q408 to Q109 bank profit recovery via the combination of mark-to-market rules and others. But looking at the market today, most people aren't seeing past the deception. They've been celebrating it for the past several weeks.
All together, there is an awful lot of unprecedented government manipulation. Perhaps, THIS bear market defies the historical trends and doesn't need the P/E and dividend moons to line up before bottoming. |
| |
May 08, 2009 |
| |
|
|
Simon Maierhofer said... |
| |
Sam, You are right about the government stimulus, the extent of it is unprecedented. The results however are not. Research shows that government interventions come too late and tend to backfire. In 1999 for example, the government changed the law to reduce the capital requirements for banks – the crash followed. On March 18th, the government announced to buy its own bonds in an effort to lower long-term interest rates. Treasury bond rates have gone from 2.50% to 4.3%. The government’s effort failed once again. The last, similar attempt - Operation Twist in the early 60s – failed also. This shows us that the government also does not learn from its mistakes. Ultimately the market will tell us how well the stimulus is working. In last issue of the ETF Profit Strategy Newsletter we discussed some of the flaws of the Public Private Investment Program (PPIP), the next issue will disclose another “government sponsored ponzi scheme” connected to the stress test. Stay tuned, even Monty Python would be proud – our long-term forecast remains on track. Best, Simon Maierhofer - Co-Founder ETFguide |
| |
May 09, 2009 |
| |
|
|
