Thursday, December 5, 2013

P/E ratio with no E spells trouble

The stock market bubble

US bubbles are as dangerous as they ever were and small investors are getting sucked in. Once the chickens get lured back into the henhouse the door slams shut and the fox fires up the stove for another big feed. Fancy buying a house, sir?

Posted by icarus @ 02:37 PM (2342 views)
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9 thoughts on “P/E ratio with no E spells trouble

  • The bubble is causing the company I work for problems.

    Their earnings for the year are $10 Million short, so they are cutting 10% of their staff so that they can justify their record share price that has been driven 3x higher, not by earnings but by the speculative stock market bubble.
    I know people in other large companies currently facing the same situation. I guess this is how the bubble collapses as workers (consumers) are sacked to justify P/E ratios then earnings collapse.

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  • leverage and margin kills bubbles when the masters of the
    universe decide so

    which could be imminent as most bull runs last 4 to 5 years

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  • Nasdaq up 230% on 2009. No discernable increase in earnings. Anyone want to buy a tulip bulb?

    S&P up about 150%. Everyone knows something is wrong but our state TV channel – BBC hardly mentions it. Sky are ignoring the peril and I wonder at the editorial decisions being made to keep ordinary people in the dark.

    Keep spending guys, keep adding up that debt….goes the message. Meanwhile Osborne says we are in a recovery. Top Bankers may have big pay rises, but like the QE money, it doesn’t filter down.

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  • About a year ago, fed up with the pitiful IRs being offered on savings accounts, I ventured into shares for the first time in my life. Being completely new to this, I bought shares in ‘safe bets’ – big household names spread, quite well, across the categories (banks, commerce, commodities, etc.). There have been a few (minor) ups and downs but, overall, they’ve barely moved in value. I don’t see the evidence to suggest that stocks and shares have risen, dramatically, in value and, therefore, have reached an unsustainable level. (i.e. a ‘bubble’).

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  • Grumpybob – the FTSE100 has risen by a little over 10% in the last 12 months. Hate to say it but maybe you just bought the wrong shares… maybe that’s why you’re grumpy? How many others did exactly what you did, hence where we are (Likewise houses for the last 20 years!).

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  • @timmy – FTSE100 growing inline with general inflation then? Thought not.

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  • @5 – Hi timmy. I can’t argue with your logic: I’m just about breaking even on the shares so I’d have to conclude that, despite, as I say, going for ‘safe’ household names, I’ve obviously not got a gift for spotting the climbers. Why am I giving shares a go? Well, I’m trying to save for a deposit on my first (ever) house (and first ever mortgage) and I was hoping to get into something that, unlike savings accounts, might, at least, keep a bit ahead of inflation. But, of course, the game is rigged. People like me don’t make significant money from shares.

    We’re not talking fortunes here, by the way. I’ve invested about £6000 in 6 different companies. The (relatively) low value of my investments is again, because I’m new to this.

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  • Post is about bubbles and risky lending in the US – relevant here since the last financial crisis was met with cries of “It’s the Americans’ fault, we couldn’t see this coming”

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  • Grumpy, don’t give up on stocks, if you’re in for the long haul, pick a few household names with a decent yield and sit tight. Corporate bonds are worth a look too, but do your research thoroughly (although that didn’t stop a few getting their fingers burnt on the co-op perp bonds).

    Back to house prices; bearish articles about the stock market for the past 5 years have in my opinion scared quite a few potential investors away. This has had little effect on the stock market, but pushed them to “invest” in that sure thing; houses…despite their feeble yields, illiquidity and the fact you have to borrow to fund the investment but hey ho.

    Merry Christmas everybody

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