Now, if you think the Western Big Boys had it tough, you ain't seen notn. Today's WSJ reports that National Oil Companies from Emerging Markets have had their ash handed to them. Petrobas, PetroChina, Gazprom, Sinooec had a combined market cap of 1.55 Trillion dollars in 2007. Higher than the top 5 Western Giants.
While the Westerners have stumbled to 1.21 T$, the Emergerers (yes that is a word 'cause I said so) have crashed yo $0.5 T$. Ouch wouldn't do justice.
Following this theme, in yesterday's Consuelo Mack show, the guests pointed out the Emerging Markets have underperformed.
Where are out dot connectors when you need them? We hear they are busy hiding their children, spouse and finance.
Oil / gas exploration megafirms have been beaten down relative to the market. Over supply due to shale oil gas. Cant export due to rules. Increased supply. Lower demand. This has aided refiners. Who made hay.
Has the pendulum swung too far? Is that light we see at the end of the proverbial tunnel?
Sir, the timing of your last sentence couldn't have been better. Refineries in the US are increasing their capacity of existing plants. And also buildiing some new plants. Some plants known as Toppers (I think) can only refine the lighter fractions. They refine it to precursor of end product and ship it off shore.
So what you ask? Didn't u read the quoted post? Must we serve everything in a silver platter?
Source last week WSJ. Due to funding constraints we simply cannot afford to go back into old piles of paper and reference them. What we write here is from memory.
About 2.5 years ago, Spain and Italy were in trouble. Their govt bond yield shot up. While I don't remember exact number from the article, I think the 10 yr yld peaked at close to 8%. The spread over the us treasury was highest. Maybe 6%.
Today? Spread is about a measly 0.6%. What gives? Investots hungry for yield bought these bonds. So they did well.
True to form one mutual fund mgr is NOW recommending these bonds. More room to run. Maybe so. But some woukd say easy money has been made. Those blessed with rock solid spheres went in when blood was on the street.
In the whither the markets we had pointed out stocks overvalued. I would not call this crushed. 1880 to 1824 is 3.3 pct drop. Considering it came fro 675 mkt still up a lot.
Always a conundrum. Depending on who you ask s&p 500 p toe based on last 12 months is 19 to 21. So while not at 2007 Oct level (P to E 27 to 30 in thint or 2000 March level p to E 40 this mkt not nearly as overvalued. But overvalued by (20 -15)/15×100 or 33 pct. So it has to drop 5/20×100 or 25 pct from current levels.
25% of 1820 is 455. So needs to reach 1820 - 455 = 1365
P to E 16 means drop 4/20 or 20 pct. Or 365..so reach 1455.
P to E 17 3/20 or 15 pct. Or 275. Reach 1545
So ideally 1365 to 1545 is range to put MORE than normal. For 401k I happened to move 1.pct at peak into money mkt. But plan to do normal cost averaging
In today WSJ mark Hulbert did analysis of tech ipo fair value.
Approach.
IPO AVERAGE sales.increase inflation adjust ed over next 5 yrs. 212 pct.
Question. Why is sales inflation adjusted.
MEDIAN P/S ratio after 5 yrs 5.87
Question. Why median for this ratio. But average for sales increase.
Both should be median to remove undue influence of extremes.
IPOs typically start from low base. So one Co could have 2000 pct sales growth in 5 yrs. Another 50%. Average is 1225%.
Also this approach was used to calculate twitter sales 5 yrs from now. Multiply that by 5.87. And you get its expected price in 5 yrs. And that price is 43% lower than current price. Can you spell OVERVALUED?
Always a conundrum. Depending on who you ask s&p 500 p toe based on last 12 months is 19 to 21. So while not at 2007 Oct level (P to E 27 to 30 in thint or 2000 March level p to E 40 this mkt not nearly as overvalued. But overvalued by (20 -15)/15×100 or 33 pct. So it has to drop 5/20×100 or 25 pct from current levels.
25% of 1820 is 455. So needs to reach 1820 - 455 = 1365
P to E 16 means drop 4/20 or 20 pct. Or 365..so reach 1455.
P to E 17 3/20 or 15 pct. Or 275. Reach 1545
So ideally 1365 to 1545 is range to put MORE than normal. For 401k I happened to move 1.pct at peak into money mkt. But plan to do normal cost averaging
Per Friday WSJ p/E for last 12 Mon is 17.69 (not 19 to 21 as I thiught).
So u can redo calcs for 15 16 17 p to e.
same day in an article p/E trailing was stated to be 16.
So which number we can trust? Not first time WSJ contradicted itself.
I trust 17.69. It was in the daily mkt dashboard.
so mkt needs to drop 3 to 16 pct.
I am comfortable with the 16 pct drop number. Or 1510. Can start nibbling at 1650? And hope it goes all way to 1300
Was readingy last week wsj. The p to e based on last 5 yr avg earnings was - Schiller does last 10 yr inflation adjusted - was 21. Maybe that's why I thought ratio was 19 to 21.
Decided to do homework. Catalyzed by Hreem Chamundaye of 44 min 10k fame.
above link gives shiller-pe - 10 yr avg inflation adjusted earnings. Upto circa 1975 whenever this ration went up above 20 it was topping off. The Oct 1987 crash occurred at ratio of 17. Only in 1929 did ratio reach 30. Rest bistory.
In 2007 Oct peak it stood at 27.5. In 2009 March bottom it was 15.
Now we all think 2009 March bottom was one of a kind buying opportunity. That it was. Compared to its recent past. But 15 was close to the average upto 1975. Only after around 1986 did mkt ratio climb steadily higher. Lifting the perceived avg to say 21.
Right now the ratio is 24.9 or close to 25. Just 10 pct lower than ratio at Oct 2007 peak. To get to we has to drop from 25 to 21. Or by 16 pct.
Identical to 16 pct drop in price I arrived at yesterday. Or at 1520.
So 10 pct drop gets me interested. Happens to be( 3 plus 16 )/2
Buy high sell low seems to be a repeating theme in wall street much as Om is a repeating chant among priests.
Now it's the turn of commodities. Back in 2000 commodity funds had 1.8 billion invested. In 10 years the commodity index doubled. And the money in such funds increased by 100X to 182 billion dollars.
As investment peeked in 2010 commodities dropped 3 years in a row thru 2013. This year they r up 9.5 pct. So bullish interest is back.