levity

--timball

the next cover for the economist

Today [08/15/07], the Graham-Dodd approach produces a very different picture from the one that Wall Street has been offering. Based on average profits over the last 10 years, the P/E ratio has been hovering around 27 recently. That’s higher than it has been at any other point over the last 130 years, save the great bubbles of the 1920s and the 1990s. The stock run-up of the 1990s was so big, in other words, that the market may still not have fully worked it off.

At noon today [10/10/08], after several gyrations in the morning, the Standard & Poor’s 500-stock index was at about 870. That meant the five-year p-e ratio was just below 12. (The corporate earnings data isn’t all available yet, so this is an estimate.) It was last that low in late 1985. Over the past 100 years, the average p-e has been about 15.5.

If you use a 10-year p-e instead, stocks look somewhat more expensive — the [current 10-year] ratio is 14, the lowest since 1988 but only a little lower than the 100-year average.

In August 2007, the 10-year price-earnings (P/E) ratio was 27.

In October 2008, the 10-year P/E ratio is 14, below the 100-year P/E (15.5) but above the "long-run average" for the depressions of the 30's and 80's (6).

-janelane, trying to make sense of my inferior 401k

Remembering a Classic Investing Theory - New York Times

No longer just a civil matter to blithely ignore, this ominous development could result in current and high level officials being indicted for crimes. I suspect the special counsel will "follow the emails" in the way that "follow the money" brought down Nixon's men during Watergate.

I'd like to know what Iglesias thinks about the potential for RICO charges coming out of all this.

David C. Iglesias: Dangerous New Turn in Justice Department Investigation

Actually, the trouble in the U.S. economy is that we have, for the last 20 years, subsidized the most unproductive form of capital accommodation. This housing capital gives you some, you know, utility services, but it's not productive in terms of increasing the productivity. We've not invested enough in machinery and other stuff and more in housing stock.

And I think to try artificially to prop up the housing market doesn't make sense. There's still a huge excess inventory of homes.

And I think we at some point realize that probably continuing subsidizing of property is not going to be the right solution. There has to be a price adjustment. The inventory has to be worked out. This housing recession is going to continue for a while. Home prices have fallen from the peak already 25 percent. My own work suggests they're going to fall another 15 percent, 14 percent, just to bring it back to what the real home prices were before this bubble started.

So we have a huge bubble, and we should not do things essentially artificially to try to prevent that market process from occurring. And I think that, over time, actually, if we have less homes and less investment in housing and more investment in productive capital, that's going to be good for the U.S. economy.

Recently:

Chop, baby, chop, and chop now.

And before:

"Soy! Soy! Soy! Soy! Soy!"

Where Do We Go from Here?

That gave GM a market capitalization of $4.3 billion - chump change for this industrial behemoth - while Ford stood only slightly better at $6.6 billion.

The stock selloff effectively puts these companies on death watch and it is easy to see why.

This would be part of why no one is willing to float anymore loans to them and they had to get a $25 billion bailout last month.

The GM, Ford death watch - Oct. 9, 2008

I get a lot of political mailings from my Georgia House representative, Jill Chambers. Thus far, they have painted a pretty decent picture of her. She is a fiscal conservative. She genuinely seems to want to keep my taxes low. Some of the mailings are fairly technically detailed in terms of budget and policy issues. She doesn't insult my intelligence.

At least, not until today.

Today, I received a mailing from her with a supposedly drunken picture from her opponent's MySpace page, some off color sarcastic quote from him about drinking, and a mention of his blog (chrisishardcore) with the implication that it is some sort of porn site or place he picks up women online.

Look, Jill, I HAVE A MYSPACE PAGE. When you drag your opponent's personal Internet presence into the campaign in an obviously dishonest manner, you're not just attacking your opponent. You're attacking every voter in your district who uses the Internet for fun, labeling us all as unelectable because we might have said something somewhere online that wasn't polished or intended for a campaign.

That is insulting, and its wrong. Jill, before I received this mailing I had no idea who your opponent was and I had a least a decent impression of you. Now, there is no way I'd vote for you. Not a chance.

In the age of blogs and social networking sites there is a need for campaigns to draw a line between people's personal and professional internet presence, and focus on the issues, unless there is a real, substantive question of character.

These mailings crossed a line that shouldn't have been crossed.

Jill Chambers, my Republican opponent in my current campaign for state House, decided to send a mail piece clearly intending to make this blog appear somehow sinister or otherwise inappropriate. I’m now bringing it back so the voters of the 81st District can judge it for themselves. Take a look around. Although many of the entries are a bit out-of-date, I hope you find at least some of them informative and/or entertaining.

As for the picture of me on Ms. Chambers’s mail piece, that was taken and posted by my younger brother when I was around 20 years old. Despite her allegation that I was “drunk,” I can assure you that is not the case. I personally believe the fact that Ms. Chambers would use a picture posted on the Internet several years ago as proof that I “post pictures of myself drunk” says a lot about her character, or lack thereof.

chrisishardcore.com: An Important Message from Chris Huttman

But if a stock market's performance is the test of a policy, this one has failed. At best, the passage of the measure did no evident good. At worst, it backfired.

Harvard economist Jeffrey Miron suspects the latter. "The bailout approach will generate uncertainty about what's going to happen," he told me. "It's quite plausible that it has not calmed markets because no one knows what it means."

Rescue or Waste?: Why the bailout isn't working - Reason Magazine

Tannerite Binary Exploding Target Company

WTF?

Tannerite Exploding Targets from Tannerite Explosives Corporation - Manufacturer of High Explosives, Low Explosives and Fireworks

Jeffrey Nelson, a spokesman for Verizon, said the company was exploring ways to charge fees to commercial senders of text messages to add a new revenue stream to its wireless business.

“It is not a free service,” Mr. Nelson said. “It didn’t cost us zero to build or to buy spectrum rights.”

This is obscene. The marginal cost to deliver SMS is practically zero.

Verizon Wireless Plans to Charge Senders of Text Messages - NYTimes.com

Laurence J. Kotlikoff:

Recapitalizing the banks and working out mortgages will take time, but the financial system will not collapse -- the government won't let it.

The markets, of course, seem to be factoring in some probability of collapse. Why is this wrong?

In short, Uncle Sam is becoming our new bank. He has also become our new insurance company.

This may sound like socialism or state capitalism, but it's simply rearranging the financial furniture.

So after scaring us half to death, this would be a good time for our other uncles -- Hank and Ben -- to make clear that we're heading for a safe landing and that there is no way in hell they will let this economy go down the tubes.

If you shout it from the rooftops it becomes true.

No Depression: Uncle Sam Has Got Our Back