The Stingy News Weekly (07/07/02)
The Markets This Week
DOW 30: 9,380 +2.96% with a median P/E of 30.0
S&P/TSX: 7,112 -0.48% with a median P/E of 34.6
The Value View
Dow at a P/E of 20: 6,253 (-33.3%) Poor Value
Dow at a P/E of 15: 4,690 (-50.0%) Fair Value
Dow at a P/E of 10: 3,127 (-66.6%) Good Value
S&P/TSX at a P/E of 20: 4,111 (-42.2%) Poor Value
S&P/TSX at a P/E of 15: 3,083 (-56.7%) Fair Value
S&P/TSX at a P/E of 10: 2,055 (-71.1%) Good Value
The tortoise & the hare revisited
"You really can't blame the financial media for their obsession with U.S. large growth companies. First we had the wild one-dimensional market of the 90's and now we're faced with the realities of the Enron, Worldcom, and Andersen Consulting debacles. So naturally the focus at quarter-end is the horrible performance of the S&P 500 and NASDAQ indexes. Two and a half years of negative returns. But we know the market is multi-dimensional, right? Small company and large value stocks have performed so much better over the past couple of years that those asset classes have actually surpassed the high flyers since 1995. Diversification does work."
Shocked and angry
"This surely is the hour of John Kenneth Galbraith, grand old man of American economics. But those who travel to the leafy suburbs of Boston in the expectation of a giant and gloating "I told you so" will come away disappointed."
Efficient Frontier: Summer 2002
Including the 2% dilution, the big lie, S.W.I.N.E., and more!
"The theory goes like this: If the market is dropping, high yielding stocks at least offer high cash flows to offset any decline in value. Nice theory, too bad it doesn't work in real life."
Wealth management in the new era
"Perhaps it goes without saying that in recent years these three articles of faith, faith in the stock market, faith in the corporate executives who run our publicly-held enterprises, and faith in the trustees who manage our money-have been tested. And found wanting."
The trouble with debt
"But should we really be surprised that another poster child of the boom--especially one whose growth has come through rapid-fire acquisitions led by a rock-star CEO--has been revealed to be a hotbed of malpractice?"
Fannie Mae distorts markets
"Fannie's continued ability to find buyers for riskless debt securities allows it to create what appears to be an increasing demand for housing by magnifying the amount of systemic risk."
The trivia questions this week are:
Q1. Who said "October is one of the peculiarly dangerous months to speculate in stocks."?
Q2. What is the sentence that follows the quote in Q1?
Q3. Who said "Remember, my son, than any man who is a bear on the future of this country will go broke."?
The answers for last week's trivia questions are:
Q1. What was the least profitable year for U.S. stocks?
A1. 1931 (Dow down 52.7%)
Q2. What was the largest market decline in the U.S.?
A2. 1929-1932 (Dow down 89%)
Q3. What was the second largest market decline in the U.S.?
A3. 1937-1938 (Dow down 49%)
Source: The Bear Book by John Rothchild
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