Next year’s estimated earnings massively exceed today’s actual earnings, and the market’s P/E is sky-high. They augur much lower returns. “There has been a positive start to the year for Australian corporate earnings estimates,” reported The Australian on 2 February. It quoted the head of Australian equities research at a global investment institution: “I think what’s … [Read more...] about Is the consensus herding you towards hefty losses?
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Does Dow 40,000 Vindicate Dow 36,000?
The book’s premises are false and its forecasts have been wildly inaccurate. By exposing its flaws I reconfirm some basics of investment. This year marks the 25th anniversary of James Glassman’s and Kevin Hassett’s book Dow 36,000: the New Strategy for Profiting from the Coming Rise in the Stock Market (Random House, 1999). It didn’t merely contend that stocks were grossly … [Read more...] about Does Dow 40,000 Vindicate Dow 36,000?
Why we mostly ignore market sentiment
Changes of sentiment don’t cause markets to ebb and flow; but their short-term fluctuations, which are largely random, affect sentiment. “So far, so good!” Ken Fisher recently exulted (“To forecast financial markets, get sentimental,” The Australian, 16 April). “My 2024 outlook (issued in January) called for strong gains down under and worldwide – but with Aussie stocks … [Read more...] about Why we mostly ignore market sentiment
“Net zero” isn’t a Megatrend: It’s a Mega-trap
The “transition to net zero” isn’t happening and “green energy” has long generated red ink. When will the herd finally acknowledge reality? “Investors can’t ignore a megatrend that’s transforming consumer, corporate and government behaviour worldwide,” Michelle Lopez asserted three years ago (see “The energy revolution is happening whether we want it or not,” 10 May 2021). … [Read more...] about “Net zero” isn’t a Megatrend: It’s a Mega-trap
Everything the mainstream says about earnings is wrong
“Experts” obsess about irrelevancies, overlook what’s crucial – and are once again prodding the herd towards the risk of large losses. It’s “an article of faith among Wall Street research departments,” wrote David Dreman in Contrarian Investment Strategy (1979): “Nothing is as important in the practice of security analysis as estimating the earnings outlook.” Whether for … [Read more...] about Everything the mainstream says about earnings is wrong
Stock tips are for patsies – are you a patsy?
Overview “Mr Market is there to serve you, not to guide you,” wrote Warren Buffett in his letter to Berkshire Hathaway’s shareholders in 1987. “If he (is) ... in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren’t certain that you understand ... Mr Market, … [Read more...] about Stock tips are for patsies – are you a patsy?
Do earnings drive stocks’ returns?
Investors greatly overstate the short-term effect of earnings and ignore the long-term impact of dividends. The implications are momentous. Overview Mainstream financial media, as well as professional and retail investors, obsess about corporate earnings and their near-term prospects. The fixation is constant, but it’s most intense during “earnings season.” The media … [Read more...] about Do earnings drive stocks’ returns?
Why the S&P 500’s Five-Year Prospects Are Poor
Its valuation is unappealing and it’s extremely top-heavy. If these variables revert to historical means, investors will sustain losses. “At times,” reckons Richard Saintvilus (“Trusting the Magnificent Seven Stocks,” Nasdaq.com, 14 November 2023), “it can be a struggle to believe in the overall direction of the stock market, particularly as uncertainty remains with … [Read more...] about Why the S&P 500’s Five-Year Prospects Are Poor
Which are Riskier: stocks or bonds?
The answer has varied over the past 150 years; it also depends upon the CPI. Are investors now underrating both asset classes’ risks? It’s one of the most basic questions that investors face. Which are riskier: stocks or bonds? The answer is crucial because, as AQR put it (“A Changing Stock-Bond Correlation: Drivers and Implications,” Q1-2023), the “relationship between … [Read more...] about Which are Riskier: stocks or bonds?
Dividends aren’t a bane – they’re a boon
Payouts aren’t merely sensible, they’re desirable: by boosting subsequent earnings, they improve companies’ and thus investors’ returns. Should dividends be “the bane of your investment life”? Does Australia’s system of dividend imputation “force companies to behave irrationally” – that is, pay overly generous dividends, retain insufficient earnings, restrict capital … [Read more...] about Dividends aren’t a bane – they’re a boon