S&P 662 = historic avg valuations & another 33% drop
["He summed up by saying that if the market returned to 40-year average valuation levels, the S&P would fall to 662, down another 33 per cent. If it retained recent equity appraisals, it could bottom out between 800 and 900']
["The first speaker was Douglas Cliggott, portfolio strategist for J. P. Morgan Chase. He has been, in my opinion, Wall Street's best and brightest strategist for three years. He lacks the image or reputation of Abby Joseph Cohen (Goldman Sachs) or Tom Galvin (Credit Suisse First Boston). Unlike them, he has been right about the market -- and for the right reasons.
Doug is a low-key, scholarly sort of presenter. He gave a detailed historical analysis of the S&P 500 (the broad U.S. equity benchmark), which was trading at about 1,000 as the meeting began, down from its all-time high of 1,527. He argued that equity risk remains as high as ever, despite the big selloff. Doug said his peers were bullish because they still were using earnings numbers for next year close to $50 per S&P "share" -- a measure that pretends the S&P costs $1,000, then calculates its profit according to the precise weighting of each index company. This suggests a price-earnings ratio of merely 20, the lowest in many years. Doug said $34 was the kind of number we should expect in the light of the rapid deterioration of the economy in the weeks before the attacks, and the terrorists' huge hits to travel, durable goods purchases and other discretionary buying. He said corporate America had been hanging on to excess staff waiting for an economic upturn; now they will throw in the towel. That $34 number suggests the S&P's multiple is closer to 30 than 20, and bear markets have tended to end with the multiple at half that level -- or less. "]
...the "ripple" effect on US corporate earnings, on consumer spending & sentiment and most importantly - on Employment/Unemployment is being vastly miscalculated imo.
But, some sectors are developing value opps and surely there will be some swing trading opps as well; but nothing is in the cards to stop the continuation of the BEAR and imho - we see DOW sub 7,000 and an event driven fall to the 5's would not surprise me... and the NAZ is going to triple digits; ie: sub 1000.
Oil & Oilpatch stocks are especially interesting for a swing trade as we at any moment can see a "WAR-Oil Supply Disruption/PREMIUM" applied to the price of Oil and Oil stocks... the question isn't so much as to "what" that premium/value is... but, rather that it's when, not if - there will be one assigned and given that we've went from OSX 120 to 58 in a straight line and that OSX 48-50 is the recent historic technical & valuation bottom - that intra-day "TURN" we just saw looked the the Street endorsing that given the "premium" is a when, not if scenario.... that an interim bottom & thus a swing trade was in the cards.
...interesting times.
FOX reports today that an Iraqui scientist who just defected says Saddam has 3,000 scientists working 24 hours a day on biological weapons, but that his nuclear program is non-existant. He is also presently testing his biologic's on prisoneers and his missles and/or unmanned drone's capable of transfering the biologic's up to 800 miles - which makes Israel, Turkey & Saudi Arabia as targets.
That we will not have a land/occupying force in Iraq and that we will not take out Saddam is appearing less & less likely by the moment. Saddam & not Bin Laden is the real "Most Wanted Man" in this War on Terrorism... and investment/trading decisions need to be factored on the likelyhood of both possible acts of desparation from Saddam, as well as likely Oil Supply disruptions and an active US led Land Force going into Iraq...
We may have DOW 6250, S&P 650, NAZ 800 and $60 Oil and $600 Gold....before this is all over....remember those numbers; as it was mere months ago that no one would have thought we'd be at OSX 58 DOW 8200 and NAZ 1400 again, or that Gold Stocks would be leading the market up 72% over the last 52 weeks, or that we'd experience human losses in a domestic act of War greater than those of Pearl Harbor...
GOLD/Silver...how much ya' got ? |
