I am new to this web site. I type with one hand, so please excuse a few typos. In the year 2000 I came very close to becoming a millionaire. I thought at the time that Greenspan would bail the market out by lowering interest rates. It was the biggest mistake of my life. Today I believe he purposely raised interest rates to cause a correction because of what he believed was the general overvaluation. Of course his interest rate hikes caused the second worst market crash in history.I don't believe the situation today is the same.in general whenever the S&P 500 drops below its 50 day moving average, there's usually a double bottom which signals a correction and a buying opportunity. It can also signal the beginnings of a recession.That means two things. First, at these prices, even though stocks are still near all-time highs, they are nevertheless bargain-priced. Second, the credit crisis that has triggered the recent volatility really isn't all that threatening or is it?
First, let's look at value. The S&P 500 may be near all-time highs, but that only puts it approximately where it was at the last high, in the year 2000, a full seven years ago. Back then, aggregate annual earnings were about $479 billion. Today, with stocks at about the same price, earnings are $820 billion.
That's right. Today you get $820 billion in earnings for the same price you used to have to pay for $479 billion. OK, a lot of that may be just that stocks were overvalued in 2000. But with earnings 71% higher now compared to seven years ago, there's no case whatsoever that stocks are overvalued today.
Those earnings just keep pouring in. Over the last year, S&P 500 earnings have grown 11.5%. The consensus estimate of analysts is that they will grow 13.3% over the coming year (and, by the way, the consensus estimate has been a very accurate forecast the last several years).
Now how about the crisis in credit markets triggered by the collapse of subprime lending? Bernake might try to rescue the housing market if he thought it was in real trouble, I don't believe that's the situation at the moment. The price of oil does worry me if it goes to four dollars at the pump, recession? as long as the consumer continues to buy buy buy this is just a short term correction. If housing values stabilize or don't drop much further.no real reason to lower interest rates. they will never lower interest rates to save the market unless they believe it is extremely overvalued.
I'm generally very conservative, but I do pull the trigger when there's a chance for a quick buck. I believe their maybe some short-term panic on Monday so I will to some modest buying near the close.
First, let's look at value. The S&P 500 may be near all-time highs, but that only puts it approximately where it was at the last high, in the year 2000, a full seven years ago. Back then, aggregate annual earnings were about $479 billion. Today, with stocks at about the same price, earnings are $820 billion.
That's right. Today you get $820 billion in earnings for the same price you used to have to pay for $479 billion. OK, a lot of that may be just that stocks were overvalued in 2000. But with earnings 71% higher now compared to seven years ago, there's no case whatsoever that stocks are overvalued today.
Those earnings just keep pouring in. Over the last year, S&P 500 earnings have grown 11.5%. The consensus estimate of analysts is that they will grow 13.3% over the coming year (and, by the way, the consensus estimate has been a very accurate forecast the last several years).
Now how about the crisis in credit markets triggered by the collapse of subprime lending? Bernake might try to rescue the housing market if he thought it was in real trouble, I don't believe that's the situation at the moment. The price of oil does worry me if it goes to four dollars at the pump, recession? as long as the consumer continues to buy buy buy this is just a short term correction. If housing values stabilize or don't drop much further.no real reason to lower interest rates. they will never lower interest rates to save the market unless they believe it is extremely overvalued.
I'm generally very conservative, but I do pull the trigger when there's a chance for a quick buck. I believe their maybe some short-term panic on Monday so I will to some modest buying near the close.
