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  • #16
    The fact is that overall and over a long time, the economy is pretty stable and I would wish to buy my basket of stocks cheaply rather than dearly, if I can discern which is which.

    After-tax corporate earnings do not range drastically. In the US, earnings range from about 3% of GDP to about 6.5% of GDP.

    You can gain a very good sense of what is dear and what is cheap by knowing the current position within this earnings range, the long-term risk premium and the long-term yields -- i.e., at the top of the top range for earnings, about 5% equity risk premium and 5.06% yields.

    By putting those numbers into a spreadsheet and doing a simple NPV calculation, we know that a basket of stocks is dear nowadays.
    Last edited by DanS; June 14, 2006, 11:50.
    I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

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    • #17
      The markets make very little sense since the April CPI report. Back then both stocks and the yield on 10-year treasuries plunged. This was explained as the result of the expectation there would be another hike in the Fed's funds rate. Today, there was another bad report on CPI, and what happens? Stocks rise, and the yield on 10-year treasuries skyrockets. The exact opposite reaction, even though another Fed's funds rate hike isn't a mere possibility anymore, but a certainty. Crazy times.
      DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

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      • #18
        Stocks have been falling over the last several weeks, however.
        I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

        Comment

        • #19
          Ok, but why should this reverse exactly when a report comes in that absolutely nails another Fed hike?
          DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

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          • #20
            Who says it reversed? It's been what, 3.5 hours since the report was released?
            I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

            Comment

            • #21
              And what's with EADS losing 26% today??!!
              I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

              Comment

              • #22
                Originally posted by DanS
                Who says it reversed? It's been what, 3.5 hours since the report was released?
                Still a pretty odd reaction (even if just initial) for something that caused such turmoil last time. Besides the rise in 10-year treasuries yields is far more pronounced.
                DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

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                • #23
                  Reading the news chain regarding S&P 500 futures, it looks like stocks were going to increase more on the open before the CPI news was released.
                  I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

                  Comment

                  • #24
                    Ok, that makes sense.
                    DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

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                    • #25
                      Originally posted by DanS
                      And what's with EADS losing 26% today??!!
                      I think Airbus is in trouble. There is talk about forcing Airlines to pay for the pollution caused by jet exhaust.
                      “It is no use trying to 'see through' first principles. If you see through everything, then everything is transparent. But a wholly transparent world is an invisible world. To 'see through' all things is the same as not to see.”

                      ― C.S. Lewis, The Abolition of Man​

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                      • #26
                        The S&P 500 is now in negative territory for the day.
                        I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

                        Comment

                        • #27
                          Originally posted by pchang
                          I think Airbus is in trouble. There is talk about forcing Airlines to pay for the pollution caused by jet exhaust.
                          Is the thought that this would make Boeing's jets better because they are slightly more efficient?
                          I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

                          Comment

                          • #28
                            EADS shares plunge on A380 delays
                            By Kevin Done, Aerospace Correspondent
                            Published: June 13 2006 20:17 | Last updated: June 14 2006 12:02

                            Shares in EADS lost more than a quarter of their value by early afternoon in Paris on Wednesday after the Airbus parent was forced on Tuesday to announce further embarrassing delays in its A380 superjumbo programme, which will cut planned deliveries of the world's biggest passenger jet next year by almost two thirds.

                            EADS said the delays could reduce forecast operating profits from the A380 programme by around €500m a year from 2007 to 2010, while free cash flow could be reduced by as much as €1bn in 2008, when the financial impact of the delays is at its most acute.
                            DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

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                            • #29
                              Originally posted by DanS


                              Is the thought that this would make Boeing's jets better because they are slightly more efficient?
                              My post was a bit disjointed. Airbus is in trouble because A350 is clearly inferior to 787. Today's news is that A380 is being delayed and it will seriously hurt Airbus revenues. But, pollution costs may further shrink airplane sales (but increase sales of new, more efficient engines to replace those on existing airplanes).
                              “It is no use trying to 'see through' first principles. If you see through everything, then everything is transparent. But a wholly transparent world is an invisible world. To 'see through' all things is the same as not to see.”

                              ― C.S. Lewis, The Abolition of Man​

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                              • #30
                                I thought they were about to announce a new plane to take the A350's place, after getting hammered hard in new orders by the 787?

                                In any event, it does look like Boeing was at least partially correct in stressing the mid-size market rather than the super-jumbo market. At a minimum, Boeing has a head start in this area.
                                I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

                                Comment

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