All Posts Tagged With: "investor"

The Wall Street Journal carries an article entitled “The Great American Bond Bubble.” The authors worry that bonds have gotten themselves into a bubble similar to tech stocks in 1999. You’ll recall that back then investors were so sure new technology would pay off that they were prepared to pay astronomical prices for dizzy tech companies.

Here we are in the second half of the calendar year. And the last three years give you absolutely no clue about what to expect. Today’s Daily Reckoning endeavours (to persevere) and to determine the future of corporate cash flows and the equity risk premium in emerging markets. But let’s start closer to home with a brief history of the last three second halves of the calendar year. In the second half of 2007 – for the six months between June 1st and January 1st.

Wall Street is still in bull mode. Can you make money by joining it? Maybe. Is it worth it? Probably not.If you do decide to play the game…just be sure you remember what game you’re playing. This is a Great Correction. Over time, prices are going to work their way down until the Dow has dropped below its March 2009 low.

Bullard said, that, “If the economy came in very weak, let’s say, in 2010, weaker than expected, we would have the option of doing further quantitative easing.” The Fed would do this through additional asset purchases, presumably with more, uh, “money” it created.

Our story begins with “Peak Oil” – the belief that conventional production of crude has already peaked, and has already slipped into an irreversible decline.

We are told that for example debt doesn’t matter because if a company takes out a certain level of debt, say a very low level of say 10% debt to equity, that’s irrelevant to the company’s value because the person buying shares in that company can take out 90% debt to equity ratio.

Your editor does not pick up foreign languages easily. But just for grins, we asked Gabriel to try his technical speak on the CRB commodities index. It’s been up, then way down, then back up. We wondered-all the fundamentals of supply, demand, growth, and recession aside-what the index looks like to trader with an eye for patterns and mind full of oscillators.

But let us not be accused of being pessimists. Take a look at the chart below. It’s from a 2002 book called Triumph of the Optimists by Elroy Dimson, Paul Marsh and Mike Stanton of Princeton University. It shows that over the last one hundred years-and importantly, prior to the blow-off phase of the credit bubble in 2000-dividends accounted for half of your total return in U.S. and U.K. common stocks.