OK, MythMan, since you asked . . .
In my IRA, sold VRTS on Monday, bought BEARX today. (BEARX is how I go short in my IRA.)
(I'm sure you still remember when I switched from short to long last October 7 in my IRA: #reply-5939657 )
In my regular account, trying to avoid capital gains taxes, I sold only enough long positions to be off margin and to buy lots of puts on semiconductor companies. If we get a real BK, the gains on the puts should exceed the losses on the remaining long positions. (Dear Lord, YES! I am willing to pay taxes on VERY LARGE SHORT-TERM WINDFALL PUTZ PROFITZ!!!-g-)
(In addition, I am praying that the Lord attended the "Austrian School of Economics" with The Twins, Mike and Will, because then, I know that he will be extremely merciful on PUTZ holders! Yeah, who needs a FLOOD when you can have a CRASH!!-g-)
WHY?
It seems unlikely that both interest rates AND corporate earnings growth rates will cooperate through 1999 to support the sky-high stock valuations. Here's a look at the 30-year bond yield:
tscn.com
As for corporate earnings growth, despite the fact that GDP was VERY strong in Q4 last year, growing 5.6%, corporate earnings growth was relatively anemic.
For 1999, Merrill Lynch estimates that S&P 500 earnings will grow by only 3.5%, while today the S&P 500 P/E closed at around 33!
Here's the article on 1999 estimated earnings growth rates:
Dow Jones Newswires
NEW YORK -- Merrill Lynch has upgraded its forecast for
1999 U.S. economic growth by 0.75 percentage point in the
wake of the "stunning" 5.6% increase in fourth quarter gross
domestic product announced last week, the investment bank
said Monday.
In a research note released Monday, Merrill Lynch chief
economist Bruce Steinberg said the bank now expects U.S.
GDP "to rise 3-to-3.5% on a calendar year basis and about
3% on a fourth-quarter-to-fourth-quarter basis during 1999."
"That is 0.75 percentage point stronger than our prior
forecasts, but slower than the 4.2% growth posted in 1998,"
he said.
Accordingly, Merrill Lynch is also raising its "top-down
estimate" for S&P 500 companies operating earnings per
share to $46.00 for 1999, up 3.5% from 1998, Steinberg said.
The bank had previously forecast earnings to decline 5%.
Steinberg noted that the "new growth forecast is about one
percentage point above consensus expectations, though the
consensus will undoubtedly start to rise."
Here's the article on the current S&P valuation:
Dow Jones Newswires
NEW YORK -- The price/earnings ratio of the Standard &
Poor's 500 index at the close of trading Thursday, Feb. 11,
was 32.92.
Wednesday, the ratio was 32.12.
A year ago, the ratio was about 25.49.
Historically, the lowest price/earnings ratio on the S&P 500
came in the second quarter of 1949, when the reading slipped
to 5.9. Over the last decade, the low was 11.7 in the fourth
quarter of 1988. The P/E ratio rose to 32.3 in the fourth
quarter of 1998, a new high on a quarterly basis, up from
28.7 in the second quarter of 1998.
Best regards, John. |
