Down goes the Dow

"And I wrote "well". See the difference."

Are you really that stupid?

If you're going to respond to a post, at least take the time to read and understand it, to the best of your ability.

The longer I live, the less patience I have for morons like you.

Also, I reiterate what I said earlier: keep watching DB. Some of the ugly truth is starting to emerge, first gold, now stocks, mortgages coming.

exactly a year ago the market hit an all time high and has skidded around since then.

Since the peak of 5/21/15 the total stock market index is down 3.2%.

The thread was quiet around that time last year but I did post this on roughly that day. GS wasn't optimistic, but wasn't far from correct.

Page 250 if you are keeping score.

"we've talked about buybacks in the past - GS is saying that divvies and buybacks will make up all the return of the SP500 this year.

I still don't see how buybacks are voodoo economics but this is interesting to me. Certainly it would be better if the economy were growing faster.

GS doesn't see the SP500 index rising from now til 12/31/15, but dividends will provide some small positive return.

http://finance.yahoo.com/news/...01258.html

The $1 trillion that U.S. companies are on track to return to shareholders this year will constitute the markets entire return in 2015, according to Goldman Sachs Group Inc.

Dividends and buybacks will be responsible for supporting a market where the median stock in the Standard & Poors 500 Index is trading at 18.2 times earnings, putting it in the 99th percentile of historical valuation, the firm said in a note to clients. Goldman Sachs forecasts that the S&P 500 will rise to 2,150 by mid-year before fading to 2,100 by the end of 2015."

Read more:

http://www.letsrun.com/forum/flat_read.php?thread=5369837&page=249#ixzz49UydlYyA

Maserati wrote:

"And I wrote "well". See the difference."

Are you really that stupid?

If you're going to respond to a post, at least take the time to read and understand it, to the best of your ability.

The longer I live, the less patience I have for morons like you.

I felt that I needed to dumb it down for you given that your prior post indicated a basic lack of understanding on your part. The fact that you now resort to insults to hide your inadequacies only confirms my suspicions.

I would normally suggest that you quit while you're ahead, but it's too late for that.

agip,

Debt whether it is individual, corporate or governmental is a problem that has been masked by low interest rates. What happens when the regime changes?

http://www.businessinsider.com/companies-masking-66-trillion-of-debt-2016-5

Igy

Is that seriously all you've got?

You should consider another line of recreation, because you suck at this one.

You are a sad little man. You have my pity, but no longer my attention. I have wasted enough time on you.

Ghost of Igloi wrote:

agip,

Debt whether it is individual, corporate or governmental is a problem that has been masked by low interest rates. What happens when the regime changes?

http://www.businessinsider.com/companies-masking-66-trillion-of-debt-2016-5

Igy

In which decade do you expect said regime change to occur? Take a close look art the price of copper, which is probably the best indicator of industrial production that exists. Since last July we went from roughly $2.42 to $1.95 in January, almost totally reversed this in February and March, but we have now reversed almost all of the gain, and we have a double top that projects even lower prices than we had in January.

The deflation of basic materials prices (except oil) may not be over yet. There may indeed be regime change, but perhaps not the one you're thinking about.

Ghost of Igloi wrote:

agip,

Debt whether it is individual, corporate or governmental is a problem that has been masked by low interest rates. What happens when the regime changes?

http://www.businessinsider.com/companies-masking-66-trillion-of-debt-2016-5

Igy

It is actually quite natural that debt is increasing. The low interest rates are not masking the debt, they are driving it. What better time to borrow than when rates are historically low. It is not a problem.

coach d wrote:

Ghost of Igloi wrote:

agip,

Debt whether it is individual, corporate or governmental is a problem that has been masked by low interest rates. What happens when the regime changes?

http://www.businessinsider.com/companies-masking-66-trillion-of-debt-2016-5

Igy

In which decade do you expect said regime change to occur? Take a close look art the price of copper, which is probably the best indicator of industrial production that exists. Since last July we went from roughly $2.42 to $1.95 in January, almost totally reversed this in February and March, but we have now reversed almost all of the gain, and we have a double top that projects even lower prices than we had in January.

The deflation of basic materials prices (except oil) may not be over yet. There may indeed be regime change, but perhaps not the one you're thinking about.

the problem with worrying about debt is that debt is fine until it isn't. And knowing where we are on the debt blowup cycle is not possible.

High debt just adds beta.In good times high corporate debt will juice economic performance. In bad times it will make things worse.

So what do you do with that? I suppose in a high debt situation you have to be ready to jump off the ride faster.

Low interest rates are masking the ability to make interest payments without collapsing net income. At the auction today, 6 month Tbills were .48%, up from .37% in the previous auction. What happens when the interest rate is 5-10 times this?

But, as I said above, assuming that the Fed CAN get interest rates up is a dangerous assumption. The new normal is low cost, low growth, so companies (most of them, it appears) aren't willing to take the risk on investing on new production, and they don't want to keep large amounts of retained earnings and make themselves a takeover target, so they're giving it back to investors in terms of stock prices.

coach d,

Copper reversed because Chinese investors found another golden goose. Once the Chinese government tightened the screws it reversed a bit.

A rise in interest rates is the regime change.

Hey if you believe we can run forever on unlimited debt go for it.

Igy

Toucher,

"What better time to borrow than when rates are historically low. It is not a problem."

Borrow till the bill has to be paid. Japan has done well on the belief hasn't it?

You might want to read Reinhardt and Rogoff, "This Time Is Different."

Igy

Igy it's semi-old news now, but it looks like the SEC is set to more strongly regulate non-GAAP earnings statements.

agip,

Your quote from a year ago:

"we've talked about buybacks in the past - GS is saying that divvies and buybacks will make up all the return of the SP500 this year."

Interesting how we have floated in the same range for a year, although with two 12% drops. During that time earnings have declined.

It is a pretty easy math problem to see where this ends, earnings either go up to cover the debt and invest in growth, or it doesn't. Well in the past year we are in the "doesn't" category. We can have faith that it will change, but at this stage of the business cycle...doubt it.

Igy

Maserati,

Like the Fed, the barn door has been open awhile. We will see the examination of these things in the coming downturn. Who would have known that stock compensation is not a business expense? Or, that failed business ventures are one time charges that are not routine business expenses?

Of course we go around blindly thinking $4.4 Trillion Fed balance sheet has little effect on the economy. People forget the Federal Reserve notes they hold are the assets against the Federal Reserve balance sheet. Where does all this credit come from? All hot potatoes seeking a return. Well how do you shrink it without affecting the economy?

Most people are more clued into the latest entertainment. Life is good, live it. No bad days. Dreaming the deck chairs just get rearranged without a loud sucking sound.

Igy

Ghost of Igloi wrote:

coach d,

Copper reversed because Chinese investors found another golden goose. Once the Chinese government tightened the screws it reversed a bit.

A rise in interest rates is the regime change.

Hey if you believe we can run forever on unlimited debt go for it.

Igy

Copper reversed (again) because there wasn't as much demand as fundamental-driven traders (not trend-followers like me) thought there was. And that's because, as China moves from export-driven to consumer-driven, there's nobody else to pick up the slack and build the stuff that China used to build, so global growth isn't what the FED and people who want higher rates want it to be.

Janet Yellen cannot raise interest rates even if she wants to. If she tries, the result will be another recession like the FED triggered in 2004 or 1998-9. And if I was a CFO, I would simply sit there until there is a bull market again that gives me the chance to covert that debt to equity (but I would be selling shares in a market like we just had in April).

Now, if the central bankers can just sit on their hands until at least December or preferably next year to give companies time to regenerate profits, which will cause the market to go up, I still would not covert to equity because it will be like 2012-2014 and won't last that long. Buy high-sell low doesn't work for investors, but it might work for companies.

Ghost of Igloi wrote:

Toucher,

"What better time to borrow than when rates are historically low. It is not a problem."

Borrow till the bill has to be paid. Japan has done well on the belief hasn't it?

You might want to read Reinhardt and Rogoff, "This Time Is Different."

Igy

Your sentence following the quote is idiotic. I hope you are not implying that I said that because I certainly did not.

The people running these corporations are not fools. They see low rates and they know this is a good time to borrow money to grow their businesses. It's not "borrows now and forever." It's borrow when the terms are most advantageous. It's good business sense.

I suppose you'd rather there be no growth?

Toucher,

Tim Cook of Apple is considered one of the best CEOs in the country. From September 30, 2013 through then end of last December Apple purchased 760 million shares of their own stock at an average of $115 a share. The stock closed today at $96.43.

I'll let you do the math.

No growth, more debt on the balance sheet, and, yes, less cash.

Brilliant.

Igy