Even if you don't buy my argument that there is plenty more downside to come as far as the U.S. economy is concerned, that doesn't necessarily mean you should acquire or own stocks.
Aside from the fact that revenues aren't keeping pace with profits and the latter are in many cases being pumped up by quick fixes that undermine future prospects -- as I noted yesterday in ""Wall Street's Gains Equal Main Street's Loss?" -- the reality is that equities simply aren't a bargain.
Indeed, the Pragmatic Capitalist says as much in a graph-filled post entitled "Is the Market Cheap":
I’ve compiled a few different measures of valuation for your consideration. Regular readers know that I am not much a “value” investor. Value, in my opinion is in the eye of the beholder. Is Apple cheaper at a high PE than GE at a low valuation? Perhaps yes, perhaps no. Most valuation metrics are based on the guesses of the analyst community - something that I believe is entirely unreliable. Nonetheless, here are a few measures to help you put things in perspective:
"I think it is good for banks if we continue to be prudent as an industry and not reach to get loan growth by reducing our underwriting," Richard Davis, chief executive of U.S. Bancorp, said last week. The Minneapolis regional bank's overall loan portfolio declined 1.2% to $182 billion from March to June, despite issuing $16 billion of mortgages. Most of the mortgages came from refinancing existing loans." Haven't we had enough sloppy loan underwriting to last for a thousand years? And you want to loosen current loan underwriting standards? I don't. Neither do I want to see the US$ collapse.
Posted by: Rocky | July 27, 2009 at 06:27 PM