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He's wrong, and not contrarian at all. It's the same macro speculation we see in the media day-in-day-out. Market highs + QE tapering = inevitable market crash. His view is shared by millions and it is hardly original.
And the figures on Exxon Mobil are McDonald's copied. Here:
XOM 2009 Revenue - $311 billion
XOM 2012 Revenue - $482 billion, pre-tax income of $79 billion
$79 billion. Just think about that for a second. This is an enormously powerful company, trading at only 5.27x pre-tax income, but oh no, when QE stops get ready for it to crash! ...
He's wrong, and not contrarian at all. It's the same macro speculation we see in the media day-in-day-out. Market highs + QE tapering = inevitable market crash. His view is shared by millions and it is hardly original.
And the figures on Exxon Mobil are McDonald's copied. Here:
XOM 2009 Revenue - $311 billion
XOM 2012 Revenue - $482 billion, pre-tax income of $79 billion
$79 billion. Just think about that for a second. This is an enormously powerful company, trading at only 5.27x pre-tax income, but oh no, when QE stops get ready for it to crash! ...
I agree. For instance, looking at price to book ratio, stocks don't look excessively overbought.
Some are, some aren't. We're at market highs, time to stop paying attention to the popular ones and starting finding ones that have received less love.
I recognize that I am a contrarian. I also recognize that the preponderance of interest in the stock market is on the long side. I understand that I am fighting an incredible Fed policy which is designed, in part, to inflate equity prices. I also know that at least in the beginning ,the PPT will be under the market on any pullbacks. And lastly, I also know that I am generally early when I start looking for a major contra move to the market's then current direction.
Are you really, really sure you want to take this fight, Ted?????
"Monetary policy is likely to remain highly accommodative long after one of the economic thresholds for the federal funds rate has been crossed," -- Fed chair nominee Janet Yellen
IBM 2009 Revenue: 95,759.00
IBM 2012 Revenue: 104,507.00
XOM 2011 Rev: 486 Bil
XOM 2012 Rev: 482 Bil
XOM 2013 Rev: 447 Bil
XOM 2014 Est Rev: 442 Bil
MCD 2011 Rev: 27 Bil
MCD 2012 Rev: 27.5 Bil
MCD 2013 Rev: 28 Bil
MCD 2014 Est Rev: 29.4 Bil
IBM 2011 Rev: 107 Bil
IBM 2012 Rev: 105 Bil
IBM 2013 Rev: 100 Bil
IBM 2014 Est Rev: 101 Bil
Large diversified corporations are experiencing flat to negative revenue growth. They have 'made their numbers' through lower interest rates, lower operating costs (fewer employees), and reducing their balance sheets (stock buy backs). Eventually you have to start to grow again, or your stock price starts to suffer. My thesis is that even though the Fed has flooded the system with free money, growth is anemic. Eventually the Fed Balance Sheet reaches terminal size, QE slows, interest rates rise, and 'the market' begins to suffer weakness. Throw in 'deflation' (which the Fed has acknowledged is at least as major a concern as in inflation) and you start to have a '29 type mess on your hands.
Are you really, really sure you want to take this fight, Ted?????
"Monetary policy is likely to remain highly accommodative long after one of the economic thresholds for the federal funds rate has been crossed," -- Fed chair nominee Janet Yellen
Yes. I am quite comfortable in my work, and way more comfortable being a little bit conservative than being fully bullish at this stage of the market.
My experience has been that when there is not a cloud in the sky you should be buying umbrellas.
BTW, I am not trying to convince anyone, nor influence anyone's investment behavior. My thoughts are my own, and guide my current trading. I am completely comfortable taking the road less traveled, and full understand that I am usually early in my positioning. It is quite easy to trade WITH the trend, and most people feel far more comfortable doing that, and assuming the risk that they will recognize a trend change quickly when it occurs, and can position themselves accordingly.
I also have a small enough investment portfolio that I can completely reverse it in a few hours of trading. My biggest concern in that regard is that we get a gap move overnight (for reasons none of us are even contemplating today) and the first few percentage points get left on the table, even though my investment thesis was broadly correct. What is worse, missing the first part of a move? Or leaving the last part of a move on the table? That is an individual decision. Right now I am 41% long, and 59% short, and scaling more and more into the short side, with the idea that I wish to be predominantly short some time during the first part of 2014--maybe by the end of the first quarter.
XOM 2011 Rev: 486 Bil
XOM 2012 Rev: 482 Bil
XOM 2013 Rev: 447 Bil
XOM 2014 Est Rev: 442 Bil
MCD 2011 Rev: 27 Bil
MCD 2012 Rev: 27.5 Bil
MCD 2013 Rev: 28 Bil
MCD 2014 Est Rev: 29.4 Bil
IBM 2011 Rev: 107 Bil
IBM 2012 Rev: 105 Bil
IBM 2013 Rev: 100 Bil
IBM 2014 Est Rev: 101 Bil
Large diversified corporations are experiencing flat to negative revenue growth. They have 'made their numbers' through lower interest rates, lower operating costs (fewer employees), and reducing their balance sheets (stock buy backs). Eventually you have to start to grow again, or your stock price starts to suffer. My thesis is that even though the Fed has flooded the system with free money, growth is anemic. Eventually the Fed Balance Sheet reaches terminal size, QE slows, interest rates rise, and 'the market' begins to suffer weakness. Throw in 'deflation' (which the Fed has acknowledged is at least as major a concern as in inflation) and you start to have a '29 type mess on your hands.
You basically used 3 companies and 1 one of them defeated your argument. The other 2 has had FLAT stock prices from 2012-now.
Notice that IBM's stock price from 2012 to 2013 hasn't increased at all, which reflects how its earnings hasn't increased. Notice the same with XOM.
Do you know what that means? It means those stocks DID NOT move the index to all time highs.
How about let's use some stocks whose prices have increased? JNJ?
10 61,587.00
11 65,030.00
12 67,224.00
or HSY
12 6,644.25
11 6,080.79
10 5,671.01
or Visa. or Home Depot, or Nike
Can you construct better examples for your argument?
Last edited by techcrium; 11-19-2013 at 02:46 PM..
It would just be anecdotal and useless. You can't take the results of a few blue chips and extrapolate.
Not to mention, people who like to draw these conclusions never understand the company well. For example:
Exxon Mobil does not care what Wall St. or traders think about its revenue and earnings trends. They really don't. They also don't care if their stock price lags because they use their massive cash flow to buy tons of it back every year. They don't care about growth just for growth's sake. All they care about is allocating their capital to get the best ROIC on each project, which does not necessarily translate to higher revs/earnings for that quarter or year.
But you wouldn't know that unless you knew Exxon Mobil. The same can be said about IBM, MCD and Coca-Cola. So to look at their trends and infer some deeper macro meaning is pure garbage.
It would just be anecdotal and useless. You can't take the results of a few blue chips and extrapolate.
Not to mention, people who like to draw these conclusions never understand the company well. For example:
Exxon Mobil does not care what Wall St. or traders think about its revenue and earnings trends. They really don't. They also don't care if their stock price lags because they use their massive cash flow to buy tons of it back every year. They don't care about growth just for growth's sake. All they care about is allocating their capital to get the best ROIC on each project, which does not necessarily translate to higher revs/earnings for that quarter or year.
But you wouldn't know that unless you knew Exxon Mobil. The same can be said about IBM, MCD and Coca-Cola. So to look at their trends and infer some deeper macro meaning is pure garbage.
There is a trend. If the aggregate of companies of, say DJIA, year over year earnings are actually decreasing, then his point is correct. We are in a "bubble"
However, I've yet to see any concrete evidence that earnings are decreasing.
The reason you use those sorts of companies (Wal Mart is another good example which just had a Revenue miss) is because they sell to a broad cross section of consumers. High end, low end, we all buy gasoline. IBM might be skewed a little bit more to corporate, but they are in all walks of society. McDonalds is also everywhere, but might be skewed a little toward the low end. It all evens out. You just want to use large companies who are broadly representative of a large portion of our economy.
I don't have to try and sell you, or persuade you, that this is an issue. MY work suggests that it is, and that this erosion is not healthy longer term for our economy, and the overall equity market. If these sorts of companies are not thriving during the loosest monetary conditions ever in America, once the background changes , and it will, their lot is likely to deteriorate, not improve.
You may have other views, other data, and other conclusions, That is all fine. I am not here to sell you anything, or make recommendations. The question was asked when did people think the equity market would begin to sell off, and I responded that I thought it would likely be some time in the first part of 2014. I offered a little bit of background as to why I thought the market would be challenged during that period of time. Perhaps I should have simply said 1Q 2014 and left it at that . If the Fed continues to pump, the sell off will be delayed, or at least mitigated. But delaying it doesn't reduce its likely evilness.
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