The Stingy News Weekly (09/20/02)
The Markets This Week
DOW 30: 7,986 -3.93% with a median P/E of 22.0
S&P/TSX: 6,202 -4.51% with a median P/E of 27.4
The Value View
Dow at a P/E of 20: 7,260 (-9.1%) Poor Value
Dow at a P/E of 15: 5,445 (-31.8%) Fair Value
Dow at a P/E of 10: 3,630 (-54.6%) Good Value
S&P/TSX at a P/E of 20: 4,527 (-27.0%) Poor Value
S&P/TSX at a P/E of 15: 3,395 (-45.3%) Fair Value
S&P/TSX at a P/E of 10: 2,264 (-63.5%) Good Value
We're not turning Japanese
"Today, as every attempt at a stock market rally in the U.S. sputters, and as every decent economic indicator that comes out seems invariably followed by a lousy one, the nasty comparison is afoot: The U.S. had a pretty gaudy bubble of its own in the 1990s, and now that it's imploded, we are experiencing a hangover that looks familiar to the long-suffering Japanese."
Will this customer sink your stock?
"Who are your unprofitable customers? We recently asked that question of top executives at one of America's biggest retailers. They responded defiantly that they had no unprofitable customers. Understand that this company was in trouble--it wasn't even earning enough to cover its cost of capital, Wall Street analysts were beating it up, and its stock was performing worse than the shares of most competitors. Yet its leaders insisted that through some dark financial voodoo, millions of profitable customers somehow added up to an unprofitable company."
"L.A. chef Nancy Silverton sold her ultra-trendy bread-baking business for millions. So how'd she pull that off without selling out?"
Q&A with Good to Great author
"There have always been villains. The whole history of RJR [as laid out in the book] Barbarians at the Gate -- that was a truly disgusting manipulation of our capitalist system. The founder of Columbia Pictures, it was written that when he died, 2,000 people went to his funeral to make sure he was dead. GE had the price-fixing scandals in the 1950s. Monopolistic practices at IBM. The modern corporation is a perfect vehicle for a small number of people to enrich themselves at the cost of everyone else."
The good CEO
"The 1990s gave rise to the celebrity CEO, the larger-than-life hero who muscles his way to the top of an organization and by sheer force of will remakes it in his own image. But with that myth shattered by the likes of Kenneth Lay, Dennis Kozlowski, Bernard Ebbers, and other disgraced corporate chieftains, it's time to reassess the very nature of leadership."
Socialism and capital stock
"This principle is seen even better in Canada's national health system, which many leftists here tout as the way medical care should be organized in the United States. The government in Canada provides all medical funding, as private payments are a violation of the law. Canadians do not have easy access to the kind of medical capital that is par for the course for Americans. For example, someone needing an MRI in Canada is likely to have to travel to another city and wait in a long line, unlike medical consumers here. (Even the small city of Cumberland, Maryland, where I live, has two MRI facilities.) Other kinds of medical capital, such as CAT scan machines, are also rare in the Canadian system and require a near act of God for someone to actually use them."
An immigrant's tale
"It's the kind of business nobody wants to run: selling PCs to price-conscious customers. But Edy Bedoya has spent a lifetime preparing for it."
This week's trivia questions are:
Q1. What is the median P/E ratio of the S&P500?
Q2. What is the median P/Sales ratio of the S&P500?
Q3. What is the median P/Book ratio of the S&P/TSX Composite?
The answers to last week's trivia questions are:
Q1. What was the value premium for large cap stocks from July 1963 through April 2002.
A1. 2.67% annually.
Q2. What was the value premium for small cap stocks from July 1963 through April 2002.
A2. 6.55% annually.
Q3. What was the growth deficit for small cap stocks from July 1963 through April 2002.
A3. 1.36% annually.
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