The Stingy News Weekly (07/01/02)
The Markets This Week
DOW 30: 9,110 -1.56% with a median P/E of 29.4
S&P/TSX: 7,146 +0.10% with a median P/E of 34.7
The Value View
Dow at a P/E of 20: 6,197 (-32.0%) Poor Value
Dow at a P/E of 15: 4,648 (-49.0%) Fair Value
Dow at a P/E of 10: 3,099 (-66.0%) Good Value
S&P/TSX at a P/E of 20: 4,119 (-42.4%) Poor Value
S&P/TSX at a P/E of 15: 3,089 (-56.8%) Fair Value
S&P/TSX at a P/E of 10: 2,059 (-71.2%) Good Value
A new personal finance
"Outlined in a recent working paper, "Life-Cycle Finance in Theory and in Practice," Bodie proposes that our common measure of personal welfare -- wealth -- is inadequate. Instead, he suggests we measure personal welfare by our lifetime access to goods, services and leisure."
Grim and bear it
"Get over it! The bull market is dead. Way dead. How do I know? It's right there roaring in your face. Sure, the market has rallied a bit lately, but that's what happens in bear markets. Stocks drift down week after week, then pop up and tantalize, then fall again some more. Don't believe me? Go look at a 2 1/2-year chart of the S&P 500"
The S&P 500 is a mutual fund - and a bad one
"One myth that appears to be imploding along with the market is the notion that investors should "passively" buy the market via the S&P 500 Index rather than buying individual stocks."
Bamboozling: a field guide
"I was talking recently with a smart CFO who knows his way around one of the industries that has been hot with fraud lately. He explained that no matter how complicated the grift, deceptive transactions can accomplish only three things: moving earnings, usually from the future to the present; avoiding tax; or hiding debt. That's it."
Simple math of wealth creation
"The Less You Spend, The More You Have. Write it on the front of your wallet, your cheque book, your conscience. That, and the corollary of The More You Spend, The Less You Have, are elemental economic observations, and ones that we all begin to make for ourselves at an early age."
The trivia questions this week are:
Q1. What was the least profitable year for U.S. stocks?
Q2. What was the largest market decline in the U.S.?
Q3. What was the second largest market decline in the U.S.?
The answers for last week's trivia questions are:
Q1. By how much did a low P/E strategy outperform the market from 1970-1996?
A1. 3.7% Annually
Q2. By how much did a low P/Book strategy outperform the market from 1970-1996?
A2. 3.7% Annually
Q3. By how much did a low P/CashFlow strategy outperform the market from 1970-1996?
A3. 2.9% Annually
Source: David Dreman's Contrarian Investment Strategies
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