With all the bad news that has been dumped upon the economy for some reason the stock market is going up. Why?
The SEC (Securities and Exchange Commission) has just set up new guidelines for core earnings. No more proforma computations. You know what proforma means - the company CEO or Treasurer waves his magic wand and says this is what I expect to appear as soon as I let the genii out of the bottle. And pigs can fly. These imaginary numbers may give his company a Price/Earnings ration of 20 which is pretty good by today's standards.
Now those mean guys in Washington have said you must reevaluate your earnings but this time figure in your stock options, pension costs and any restructuring charges. Holy Cow, that makes the P/E ratio 37. And that ain't no bargain when you are buying stock. The 100 year average has run about a 14 P/E. If the company has not been paying any dividends then this is a stock that must be suspect for any long term holding.
Because of these new guidelines the entire S&P Index P/E has gone from a 33 to 49. That is much better than it was in January 2002 when it reached 69. This number makes the entire market overvalued and still leaves me with the question of how can the market advance using these high P/Es?
There are a couple of answers and neither may be the right one.
The market has become severely oversold. The bear people have been riding it down until the news media finally recognized we have a long-term bear market. There have become too many traders who think there is no bottom and are willing to sell anything and everything. Enter the trading bargain hunters. It will now be the bears turn to be punished.
It takes money to put the market up. Where is that coming from? Our white knight, Sir Greenspan, has come in with his bags of money this past week. Look past our borders and you will see stock exchanges in every major country in the world that look sicker than ours. Foreign investors want a new home for their money and it seems the U.S. market looks darn good. As that money has started buying you may begin to see pension plan and mutual fund managers coming into the market.
The talking heads on TV and radio will give many other reasons that can be fueling the market advance and they may also be correct. Our market may be overvalued as we see it, but to others it looks like a bargain. Money is always looking for the greatest return and with wire transfers billions of dollars can and does move in a matter of hours. Oversold to the foreign market traders means underbought. It seems they have put on their buying clothes and want a piece of the action as our market is headed up - at least for a while.
(c) 2005
Al Thomas' best selling book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter to receive his market letter for 3 months at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.
Mercedes Benz s500 rentals Salem ..Just about everything you have been told about Social Security... Read More
I was recently interviewed for a press release through a... Read More
Outlined below are some of the advantages and disadvantages of... Read More
After the publication of the first part of this two... Read More
The bear market that showed up at the end of... Read More
A 'stock option' is a contract between two parties giving... Read More
The debate rages all over Eastern and Central Europe, in... Read More
Recently I was invited to appear on a live CNNfn... Read More
Sometime around 1980, can't remember exactly, there was a flight... Read More
As a novice trader, you'll often feel the need to... Read More
The demand for world oil is increasing while world reserves... Read More
What the heck am I talking about?It is often said... Read More
It has been said that low cost or even free... Read More
I have been trading for several decades and was an... Read More
Suppose your position has made a big move and you... Read More
When is a dividend not a dividend?The latest thing "conservative"... Read More
One Saturday morning, while he was sitting at his computer... Read More
I go to the Money Show every year to visit... Read More
With over 6,000 mutual funds available, it may be tempting... Read More
Fundamental analysis.Fundamentals analysis says the best way to predict the... Read More
I continually hear from economists, talking heads, other market letter... Read More
Professional stock options traders use the term lean to refer... Read More
The date October 13, 2000 will forever be embedded in... Read More
The stock market has been in an up trend for... Read More
I would like to share with the reader an article... Read More
Dowagiac cheap limo service ..There are many important things you need to know to... Read More
The demand for world oil is increasing while world reserves... Read More
Three little pigs went to the market to stock up... Read More
THERE'S SOMETHING TO BE SAID FOR standing firm in the... Read More
In a previously written article, we expanded the use of... Read More
Let's say you are interested in this one company. You... Read More
For years investors have been taught to look into the... Read More
Both the stock market and oil prices rallied recently, which... Read More
There is nothing more exciting than finding an undervalued stock... Read More
What is leverage?Here is a definition of leverage from an... Read More
In November of 2000 when the NASDAQ was trading at... Read More
Most stock market traders have a favorite technical indicator.The one... Read More
One of the basic laws of physics is that a... Read More
The recent criminal fiasco in the mutual fund industry is... Read More
Among the largest forces that affect stock prices are inflation,... Read More
If you've ever flipped on the television to CNN Financial... Read More
Profitable day traders recognize that momentum trading is among the... Read More
Refuse is a serious issue in any society, about as... Read More
The ABC's of Stock Trading SuccessStock trading success...why is it... Read More
Let me start by saying that...Most online brokers do not... Read More
With over 6,000 mutual funds available, it may be tempting... Read More
When the stock market is going up and all your... Read More
Wall Street has been preaching for years and years to... Read More
Every publicly traded company is required by the SEC(Securities and... Read More
Now where have I heard that before? I know. It... Read More
Stocks & Mutual Fund |