Comments on: Do P/E’s matter? http://sovereignspeculator.com/2009/09/03/do-pes-matter/ Thoughts on the markets and the decline of the west Mon, 20 Dec 2010 23:18:25 +0000 http://wordpress.org/?v=2.6 By: craig http://sovereignspeculator.com/2009/09/03/do-pes-matter/#comment-6068 craig Thu, 17 Sep 2009 01:21:21 +0000 http://sovereignspeculator.com/?p=2744#comment-6068 it depends how closely Earnings approximate sustainable Free Cash Flow. If FCF is materially less than earnings, then earnings and PEs matter less. If company A has EPS of $1 and sustainable FCF of $1 a share, then its PE matters....If company B has EPS of $1 and FCF of $0.25, then its' PE is far less meaningful as a barometer of valuation. it depends how closely Earnings approximate sustainable Free Cash Flow. If FCF is materially less than earnings, then earnings and PEs matter less. If company A has EPS of $1 and sustainable FCF of $1 a share, then its PE matters….If company B has EPS of $1 and FCF of $0.25, then its’ PE is far less meaningful as a barometer of valuation.

]]> By: Aki_Izayoi http://sovereignspeculator.com/2009/09/03/do-pes-matter/#comment-5845 Aki_Izayoi Mon, 07 Sep 2009 01:52:12 +0000 http://sovereignspeculator.com/?p=2744#comment-5845 I think many investors are already positioned for gold's advance during a general decline in the equity market. Does anyone have any information about the composition of precious metals (and yes, this includes "paper gold" and PM mining equity too) in investor's (aggregate) portfolios? I supposed it has increased so they are already positioned for it. I also hypothesized that gold would do relatively well in this environment, and I heard that the Chinese government is encouraging people to buy PMs. The Chinese have the perfect investor profile for one to hold gold (e.g. a low long term intertemporal discount rate considering that they are savers.) I think many investors are already positioned for gold’s advance during a general decline in the equity market.

Does anyone have any information about the composition of precious metals (and yes, this includes “paper gold” and PM mining equity too) in investor’s (aggregate) portfolios? I supposed it has increased so they are already positioned for it. I also hypothesized that gold would do relatively well in this environment, and I heard that the Chinese government is encouraging people to buy PMs. The Chinese have the perfect investor profile for one to hold gold (e.g. a low long term intertemporal discount rate considering that they are savers.)

]]> By: golfBoy http://sovereignspeculator.com/2009/09/03/do-pes-matter/#comment-5839 golfBoy Sun, 06 Sep 2009 15:44:27 +0000 http://sovereignspeculator.com/?p=2744#comment-5839 Just speculating: maybe gold will gain from an initial flight to safety as P3 gets rolling... then the "all the same market" effect will kick in during the latter stages of P3, just as it did in wave 3 of P1. Just speculating: maybe gold will gain from an initial flight to safety as P3 gets rolling… then the “all the same market” effect will kick in during the latter stages of P3, just as it did in wave 3 of P1.

]]> By: PEJ http://sovereignspeculator.com/2009/09/03/do-pes-matter/#comment-5820 PEJ Sat, 05 Sep 2009 19:02:38 +0000 http://sovereignspeculator.com/?p=2744#comment-5820 Aki_Izayoi, what are your sources for DSI? I just read from Babak on his post today on traders narrative: The Daily Sentiment Index from Jake Bernstein continues to show a rather frothy mood on the street. This week it was still at the elevated levels from last week (88%) while the Nasdaq futures traders were equally optimistic at 87%: Aki_Izayoi, what are your sources for DSI? I just read from Babak on his post today on traders narrative:

The Daily Sentiment Index from Jake Bernstein continues to show a rather frothy mood on the street. This week it was still at the elevated levels from last week (88%) while the Nasdaq futures traders were equally optimistic at 87%:

]]> By: Max http://sovereignspeculator.com/2009/09/03/do-pes-matter/#comment-5819 Max Sat, 05 Sep 2009 17:43:38 +0000 http://sovereignspeculator.com/?p=2744#comment-5819 Mark Hulbert noted that gold sentiment is surprisingly lukewarm among the goldbugs he monitors. So if I had to gamble (which I don't and won't!), I'd gamble on gold blowing through the old highs. The experts are always wrong! Mark Hulbert noted that gold sentiment is surprisingly lukewarm among the goldbugs he monitors. So if I had to gamble (which I don’t and won’t!), I’d gamble on gold blowing through the old highs. The experts are always wrong!

]]> By: Aki_Izayoi http://sovereignspeculator.com/2009/09/03/do-pes-matter/#comment-5818 Aki_Izayoi Sat, 05 Sep 2009 17:17:02 +0000 http://sovereignspeculator.com/?p=2744#comment-5818 There are other indicators that show a blow off phase... such as when the market is selling off on good news and the focus on financials in the latter rallies which means breadth was gone. The June sell-offs also lacked breadth. However, my objections are based on sentiment. I do not like the NYTimes article. Since a link from a sentiment site didn't go through because I posted a lot of links in that comment, I'll post what I found on sentiment: <blockquote>“The weekly AAII measure of sentiment continues to reflect a repentant US retail investor. This week the bulls were unchanged at 34% while the bears increased 9% points to 49%. This is a very abrupt change as it was just 4 weeks ago (Sentiment Overview: Week Of July 31st, 2009) that we had the mirror opposite with 48% bulls and 31% bears. And it was only 2 weeks ago when we saw 51% bulls! This is especially meaningful as the market is actually trading higher ”</blockquote> There are other indicators that show a blow off phase… such as when the market is selling off on good news and the focus on financials in the latter rallies which means breadth was gone. The June sell-offs also lacked breadth.

However, my objections are based on sentiment. I do not like the NYTimes article. Since a link from a sentiment site didn’t go through because I posted a lot of links in that comment, I’ll post what I found on sentiment:

“The weekly AAII measure of sentiment continues to reflect a repentant US retail investor. This week the bulls were unchanged at 34% while the bears increased 9% points to 49%. This is a very abrupt change as it was just 4 weeks ago (Sentiment Overview: Week Of July 31st, 2009) that we had the mirror opposite with 48% bulls and 31% bears. And it was only 2 weeks ago when we saw 51% bulls! This is especially meaningful as the market is actually trading higher ”

]]> By: Mike http://sovereignspeculator.com/2009/09/03/do-pes-matter/#comment-5816 Mike Sat, 05 Sep 2009 14:47:56 +0000 http://sovereignspeculator.com/?p=2744#comment-5816 Aki, I think the jury is still out on August as a major top in stocks. DSI and 20 day put/call reached 2-year extremes, and volume and breadth dwindled as the rally advanced, and junk lead the whole way. Also, the dollar is almost certainly bottoming. It is too early to abandon a long- term short position. Why would you do that if the high is still in place? Even a retest might not negate this, depending on volume, breadth and leadership. Aki, I think the jury is still out on August as a major top in stocks. DSI and 20 day put/call reached 2-year extremes, and volume and breadth dwindled as the rally advanced, and junk lead the whole way. Also, the dollar is almost certainly bottoming. It is too early to abandon a long- term short position. Why would you do that if the high is still in place? Even a retest might not negate this, depending on volume, breadth and leadership.

]]> By: Mike http://sovereignspeculator.com/2009/09/03/do-pes-matter/#comment-5815 Mike Sat, 05 Sep 2009 14:36:31 +0000 http://sovereignspeculator.com/?p=2744#comment-5815 I'm not always short gold by the way -- typically only silver actually, and only when DSI breeches 90% bulls. I even went long futures in July, but with extreme bullishness again I might short SI next week. I’m not always short gold by the way — typically only silver actually, and only when DSI breeches 90% bulls. I even went long futures in July, but with extreme bullishness again I might short SI next week.

]]> By: Mike http://sovereignspeculator.com/2009/09/03/do-pes-matter/#comment-5814 Mike Sat, 05 Sep 2009 14:30:55 +0000 http://sovereignspeculator.com/?p=2744#comment-5814 Funny how nobody gets nastier than the gold bugs. And to me of all people, who would abolish central banks and allow gold and silver tender -- I think that makes me a gold bug, doesn't it? I even consistently say that Dow:Gold should fall to 2:1 or lower. But say that too many traders love gold and that it is overbought, and I'm the enemy. Sheesh. Funny how nobody gets nastier than the gold bugs. And to me of all people, who would abolish central banks and allow gold and silver tender — I think that makes me a gold bug, doesn’t it? I even consistently say that Dow:Gold should fall to 2:1 or lower. But say that too many traders love gold and that it is overbought, and I’m the enemy. Sheesh.

]]> By: Aki_Izayoi http://sovereignspeculator.com/2009/09/03/do-pes-matter/#comment-5813 Aki_Izayoi Sat, 05 Sep 2009 14:25:56 +0000 http://sovereignspeculator.com/?p=2744#comment-5813 "The weekly AAII measure of sentiment continues to reflect a repentant US retail investor. This week the bulls were unchanged at 34% while the bears increased 9% points to 49%. This is a very abrupt change as it was just 4 weeks ago (Sentiment Overview: Week Of July 31st, 2009) that we had the mirror opposite with 48% bulls and 31% bears. And it was only 2 weeks ago when we saw 51% bulls! This is especially meaningful as the market is actually trading higher " Links: http://www.tradersnarrative.com/sentiment-overview-week-of-august-28th-2009-2881.html (Sentiment) http://www.nytimes.com/2009/08/31/business/31markets.html (Some analysts call an end to rally --- this is a major blow to a short term bearish case) http://pragcap.com/paul-tudor-jones-on-the-bear-market-rally (The entire Paul Tudor Jones) http://www.youtube.com/watch?v=bl_Uiv89Tck&feature=related (Hugh Hendry on gold) “The weekly AAII measure of sentiment continues to reflect a repentant US retail investor. This week the bulls were unchanged at 34% while the bears increased 9% points to 49%. This is a very abrupt change as it was just 4 weeks ago (Sentiment Overview: Week Of July 31st, 2009) that we had the mirror opposite with 48% bulls and 31% bears. And it was only 2 weeks ago when we saw 51% bulls! This is especially meaningful as the market is actually trading higher ”

Links:
http://www.tradersnarrative.com/sentiment-overview-week-of-august-28th-2009-2881.html (Sentiment)
http://www.nytimes.com/2009/08/31/business/31markets.html (Some analysts call an end to rally — this is a major blow to a short term bearish case)
http://pragcap.com/paul-tudor-jones-on-the-bear-market-rally (The entire Paul Tudor Jones)
http://www.youtube.com/watch?v=bl_Uiv89Tck&feature=related (Hugh Hendry on gold)

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