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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (73855)	11/8/2006 11:29:17 AM
From: Real Man	Read Replies (1) \| Respond to of 110194

That's true. But it is also true that the debt of 1/2 of SP500 companies is now rated ``junk'' by bond rating agencies, the highest fraction ever. It is also true that most earnings growth in SP comes from oil companies and banks. Liquidity is injected into these markets, so they rally. A bunch was injected today. This can continue forever. The achilles heel of this process is the value of the dollar. So far, though, nothing drastic has been happening on that front - the dollar is getting bought by someone, and so is all the new dollar-denominated debt, including junk. But a break of 80 for USD index could have very negative consequences: lower dollar, higher rates, lower stocks. How negative? It depends how long they can play these games.

To: John Vosilla who wrote (73855)	11/8/2006 11:52:56 AM
From: $Mogul	Read Replies (1) \| Respond to of 110194

"A big reason why the stock market has rallied is it cheap on a forward earnings basis relative to the risk free 10 year treasury and corporate balance sheets have never been healthier" Actually the risk free ten year bond is more undervalued at this point then equities in general As a astute investor my data shows that you never want to look at forward earnings projections for a basis for investment. It is one of the single worst things you could do. You only want to look at back PE's for analysis. The sell sides trick is the forward PE to the retail investor. Most forward PE's will never come to fruition, and if the slashing comes for projections (as I fear they will soon for Q1) many will be left in the lurch. Many do not even realize that over the last 5 years companies have just beaten revised lower earnings. Real earnings are not nearly as good as the sell side wants one to believe. Forward PE's have quantitativly shown that there absoluutly zero value placed on them for performance. Actually much worse performance can be shown by using them.