Hi Joel, just for fun … I will respond to the TV program
<<notwithstanding the issue of valuation.... >>
Any one trying to make a case for “this time it is different” will necessarily have to side step the valuation issue. I simply have not seen the issue side stepped so directly.
<<growth in efficiency producing products has shifted to internal uses vs. the more visible and now decimated rapid growth vis a vis an internet linked presence....>>
Muckedy muck and mush. The efficiency, and the concomitant increase in absolute amount of money and in the velocity of money are shaking our very complicated but piece-meal designed interlocking systems. For example, the efficiency of trading based on comparative advantages of nations is driving huge capital flows, across currency denominations, causing damages we have not had time to imagine yet. Thailand and all the little guys took a dusting. Now it will be the big guys turn. The trading system, had it been properly designed, would have necessitated a single global currency, and in time, a single standard of living.
<<the reaction to current conditions is compressed...hence... in some cases, devaluation of business models et al, which should, in the case, normally take place in a 9 month or 12 month time period, have already taken place in a much more rapid fashion...i.e. instant adjustment, instant reaction...and of course made possible by effieciency infrastructure already in place during the previous build out... >>
Yup, instant adjustment so far has simply meant instant destruction … a company’s whole life cycle happening in one glorious business cycle.
<<resource use is shifting...where headline stories may show massive dislocation in, say, technology, allocation is now going to heretofore starving sectors that did not enjoy the same attention as those in the spotlight during the dot bomb revolution....and this includes human resources...so that the net current effect is far more stable than headlines might suggest.... >>
Wealth is being destroyed at every step. The liquidity bubble has always moved, since the Roman times, between territories, between asset classes. Having one foot in boiling hot water and one in polar ice cold water is also dislocating to life, but on average, the temperature is OK.
<<caution in regard to consumer spending... is allayed in part not by divestment of equity holdings but through re-financing of home equity ... from which the net surplus offsets the need to sell other assets...and also offsets extreme consumer pullbacks in as much as avg wealth in the USA is not in the stock market but is in home equity.... >>
And so instead of having no savings to fall back on when unemployed, the poor heroic consumer will stand to lose his home as well. This last attempt at a consumer led soft landing is not a solution, but the cause of new problems. Financial laws, like natural laws, are immutable, impersonal, and savaging. In most countries, folks do not buy cars on credit. In many countries, folks cannot spend their house. In America, the many smart people have figured out a way to do both, on ever more spectacular scale. Efficiency, in the form of an engine, must be married to a strong vehicle system, designed specifically for that efficient engine. Are all the sub-systems to spec in America, and are all the I/O interfaces to the world of the high throughput variety?
<<that over all, thus far, income vs. spending has still never been better and is the bottom line for the core confidence of the working country.... >>
Day turns to night in minutes, especially during winter. Business cycles have existed for all of recorded history, and so are we the lucky generation to witness the cycle’s demise? No need to hang around outside until the sunset. Go home right now.
<<much dot com finance came from surplus capital options created, hence a zero sum game...transfer from one account into another in a close system... >>
Following this new economic theory of how no wealth is ever lost, let’s do it all over again. I actually want to agree with the above thought … transfer the wealth to me, let me not waste it on a Philip Patek Star 2000 pocket watch with Perpetual Star field, moon phase, sun rise/set and 20+ other functions by transferring the wealth to the Swiss watch makers … US$ 7 mm for the platinum edition.
<<thus.. the long view... does not yet consider places where there are still over capacities that are not yet reduced to acceptable levels...but certainly can anticipate those places...and does consider where capital will have a sustainable return in places where the above outlined resources have shifted.... >>
Yes, and so what does this have to do with specific stocks to buy? Which one?
<<and last....taking out all money losing members of the nasdaq (i've seen this in three places besides tonite's program)...nasdaq avg p/e moves from the 120's to 35...not including however the issue of declining earnings against unadjusted current valuations.... >>
For companies making no free cash flow on sustainable basis, the valuation should be pretty easy to calculate, and it is not 35 x accounting earnings. Try 10 x.
<<so.... does the theory of certain bottoms in sight make sense to you...and in time, to be followed by other sets of lagging bottoms... fundamentals only...and not including emotional and/or other irrational forces beyond this outline.... >>
I hope everyone in the world believes this pitch, drive the Nasdaq to 5000 again. It would be like my parents saying “Pam is coming over for homework with you. We will be back at 10:30 after the movie.”
Chugs, Jay |
