Stocks Appear Cheap; Those Forward Earnings Estimates Are Still Too High Though

10/26/08 Traditional methods of stock analysis and valuation are out the window. Don't believe me. Just ask the "experts" who are on the Fox Business round table discussions who kept saying "buy now", "Look, Warren Buffet, he's buying", etc. for the last few weeks. Here's my spin on why the market swings so wildly and why the economists, stock charting analysts with their off the chart voatility index models, etc. are missing it. The amount of dollars exiting (and perhaps one day entering) are on the order of magnitude has not been seen before. There are no historical models out there that take into account the volume of cash being moved. The radical off a cliff downtrend will continue as the mutual funds who can not turn on a dime like individual investors continue to dump stocks to meet cash withdrawl obligations. Look for this market to continue southward to around 5000-6000 by Summer 2009. Then the wild swings will be in weekly increments as opposed to daily increments. I don't forsee alot of flatlining from this market at all. Nothing but radical ups and downs. Bear markets traditional lop off 40%-50% of their market value. My guess is we are going to be closer to 60% losses from the top.

Cody, the world is in a Deflationary Contraction that will feed on itself for a long time. As the worlds' economy continues to contract, the Stock Markets will follow along like stair steps. The markets will continue to fall for a LONG time to come. This is a (3 generation) LONG CYCLE Deflationary Contraction, not a (4-6 year) SHORT CYCLE Inflationary Contraction. It is world wide and will take many years to bottom out and regain the confience in the economy needed for recovery. This will take a long time to recover. Japan's Recovery has been ongoing for 18 years, Sweden's was about 5 years, however the rest of the world's economy was still OK for Sweden. This current economic cycle has involved the entire world, this complicates the recovery. After the Deflation will come a round of Inflation caused by all the huge ammounts of fiat money flooding the world's economies. The world's central banks are trying to blunt the defaltion by inflating the money supply. After the deflation starts to turn around, the debased and inflated money supply will start a huge inflation problem. The central banks will need to raise interest to slow inflation and that will be the second problem the world will face. The stock markets of the world HATE uncertainty and the world is definately uncertain about anything right now........

Keep going Cody, Dont let Eric give you crap on your show,hes all about himself and the market boys,you just keep us informed. Thanks again

Hey Cody, Dont let Eric give you crap on your show,hes all about himself and the market boys,you just keep us informed. Thanks again

Hey Cody, I am tired of hearing Eric talk about how good the market did today when it doesn't go "limit down." Give him heck, Cody.

Hey Cody who cares about things trivial like P/E ratios. We’ve got a fresh round of government interference next week. Boy I can’t wait. When they run out of bullets, this things coming down hard, real hard. Oh, man when the money gets squandered, then what?

I do think the right direction will be more and more local community banks. Keep the big 9 at bay - until we can disconnect the wiring on the bomb. Those big 9 financial institutions just sucking down the fumes from hundreds of billions generated in the future from the unborn ? Big time bomb. AIG falls ? you might as well look back to 9.11 and pretend 1/2 of NYC was taken out. AIG would cost more than rebuilding Manhattan- in entirety. Yet ? Who cares about the blatent IGNORANCE that led to this fallout the deregulation. Odd, I seem to smell the scent of ignorance here with terrorism to0, I mean, is it not flat out LACK OF EDUCATION that creates people who are not able to interface productively with society ? E.g. criminals ? That is, by MY long thought out definition of criminal 'Anyone who is a threat to your community' (expand to global in some cases!) ? Yeah, the people who deregulated FEAR, the people who deregulated the banking sector - AND - the people who deregulated YOU - as a citizen. Habeas Corpus kids ? What's that, hey Little Bobby, yer' lookin' an aweful lot like one of them - a commie, or is it nig ? or - wait, we don't use those words for the same dehumanizing CONCEPTS that back them. Ignorance takes no form in the night - except you know it when you run into it. One thing for sure though, FBN went OUT of the way on denial of this impending crisis, short of Liz MacDonald. It's going to be HARD to stomach anyone sitting there trying to tell you how wonderful the tap water is while the house is on fire.

"Thanks for the info Code - we will await the word on when its time." I'm in line with Cody on this. Earnings picture looks terrible in the forseeable future. Capitalism wins in the end. Nobody with any sense is trying to find a bottom in this market. "Analysts current consensus estimates for next year is also about $6 a share, giving it a forward P/E ratio of about 6 also." Unless this is adjusted, the misses will come hard and heavy for two or three quarters. I think I'll wait to blindly follow Buffet into the pit. Eric, I like your call on XOM, good advice, what, you get a bump for what, five minutes. Why would you steer people into oil when you're probably shorting the H out of it? Good advice oil companies always do well on supply cuts. Sinister man, sinister. When did Happy Hour stock picks become 2 minute day trades.

CAN AIG Fall ? Will AIG Fall ? Well at 120 Billion estimated JUST to help them get 'shored up' ? Whatever THAAYAT means ? wow "Mom, Dad, can I have 120 billion JUST to face myself in the mirror in the morning ? " After that, MAYBE I'll get a job at Micky Dee's - the ? only thing US stocks can look to ? What does THAT say. Your best bet was a store who has a CLOWN for a symbol ? I think this entire fiasco is more akin to the Hamburglar. I probably suggest hunting down, er, wrong wording (sorry bout that last incident Grimmy), but I suggest find Good ole Grimmace. Grimmace does NOT need a black SUV to derive self esteem in HIS life. Uh oh, is Grimmace a boy or girl ? anyone ?

Hey, I want a national debt card too !

According to my outlook ? I think we now know 9 out of 10 black SUV luxury vehicles year 2003 to 2008 - were financed by HELOC's on a CountryWide loan taken by viewing Fox thinking, hey, the terrorists are all gonna git us anyways, let's live it up ? Now that we know how people lived off of HELOC's on loans they should never have qualified for ? Thanks to the removal of the market police ? I'd say giving AUG ? 120 Billion ? According to MY formula here, we should see AIG partying it up, as if THEY TOO just got 2 new black SUV's one for him, one for her, and oh heck, a third just to shove it to the neighbors. Bottom line ? Before ? AIG could fall, NOW ? The US Treasury is now jeopardized. hmm - 90 billion SO FAR, and AIG can't tell where it's gone ? And they want 120 ? Best part ? The very taking ON of bad loans by clients who were 'not with the greatest PICO ?' Is EXACTLY what Paulson JUST DID. This will NAIL this coffin shut. Anyone 'Americans' who watch Ollie North War Time Stories - instead of watching how Paulson and friends were jeopardizing the entire US financial infrastructure ? Well -we're all responsible for how we spend our time now, aren't we ? Either way - BOTTOM LINE - Paulson is giving out SUB PRIME LOANS to US corporations to save them from the fallout of the sub prime they took on either as mortgaged backed securities or - heck, if they were CountryWide themselves. Thought you might get some milage out of realizing, we're STILL giving out the Sub Prime. AIG ? near 2 bucks ? A buy ? Or should we ask why the Federal Gov. is giving them nearly 125 Billion - for what ? So they can now instead of crashing as a corporate entity ? the US can take the hit ? Paulson argues what ? Oh, AIG can't fall, everything else will go with it. AIG isn't all so evil here, AIG got caught backing bad goods. Irresponsible, sure. The criminal element was upstream in who packaged it up for AIG. Either way - we just took the entire nation Sub Prime. For a while I wanted to get in on all this borrowing from the unborn - but 'cha know' ? I've seen cats chase their own tails. I'd be buying into what ? What's next ? If the US rescues AIG, who rescues the US ? Uh, I think China will probably 'let the US citizens' work in factories for US corporations, but the booming 300 million middle class in China probably will look at the US and go - pfttt - over 300 million earning over 50k a year. Not Bad. Odd China would come out of this where capitalism just changed to - I don't know what you call the AIG bailout, or any of the federalization of the banks -short of well planned or flat out dangerous, MAINLY that it invalidates capitalism.

Well Cody, And here I decided I was done with these boards ! I wanted to share an insight that just occurred to me. While looking at AIG's $1.60 +/- $0.10 there from oh, $60 a year ago, AND that it's pulled nearly 90 BILLION already with MORE to come from Treasury to heal it's losses (and they say they don't have granularity on where that even goes ? ) ? Thinking to myself, AIG ? this can't fail, the Treasury took 80% ownership, why ? I'll get into the stock market TODAY ! Then ? I realized, wait a second here, Paulson has taken what was a jeopardized CORPORATION, where only a corporate entity would fail in pure capitalism ? Now by federalizing it ? and the other risky banking outfits ? He's jeopardized the entire nation state. Talk about national security ! Second - and this should be first, this was the BIG epiphany - and let's remember, Paulson's no genius, nor is Bernanke, TRUST ME - heh - some things really DO work top down - but if you think about it ? The US Government has just given out loans to people who don't deserve them. Sound familiar ? You bet, we just sub primed US corporate banking sector. We used the good ole same ole thinking system that LED to sub prime toxicity passed around in brown paper bags left on doorsteps this Halloween. Think about that. We JUST repeated the very same thinking system that birthed this problem. We gave out loans to corporations like AIG - who just announced they've taken near 90 billion SO far (and don't know what they did with it) and want up to 120 billion total. All for 80% Fed ownership. And hmm... BEFORE ? We were facing a few corporations that would fail, now ? when the integrity of the entire nation state is back by these 'wonderful investments' ? into AIG ? etc ? Now it's not just a corporation, it's the nation. So, let's ask - is this an intentional attempt to take down America ? In finality to bring in a new world order ? I don't think there is one person who supports this. Take Bear Stearns announcement today ? 3 billion in losses since the Gov. took it ? So, ALL OF A SUDDEN, tax payers JUST paid 3 billion on LOSSES from Bear Stearns. Yet ? Where was the 'auto signup' for the profits ? This is no longer a nation WORTHY of investment into. Not by spirit or dollar. Then again, I have been waiting for nationalism to turn on a dime and birth globalism. Really, silly borders aren't worth nuclear weapons no are they ? Let's ask the kids !

Somebody told us Wall Street fell, But, we were so poor that we couldn't tell, Cotton was short and the weeds were tall, But, Mr. Roosevelt's a'gonna save us all. "Song of the South." Alabama.

Going to be a rough day on the market today. Hope we see you this afternoon Cody with some tips, tales and takes.

It's funny, but, no one in the financial news industry has been telling the real downside of government intervention in the markets. Here are three can't miss stories coming hot off the presses soon: 1. House Democrats are already calling for another bailout package, this one aimed at providing infrastructure funding for state and local governments that are having a hard time pulling in enough taxes in a down economy. Look for a plan to provide Federal guarantees for state and local bonds, as well as additional cash to cash-strapped cities. Never mind what sort of mismanagement and political shenanigans left them short in the first place, it won't matter. As Federal guarantees make state and municipal bonds attractive, expect interest rates to rise for businesses trying to raise money, and forget about small business, they're toast. Why risk your capital on capitalism when tax free bonds offer safety and Uncle Sam's guarantee? You can be sure that this bond guarantee comes without any risk premium attached based on the municipalities involved ever being able to repay Washington. Can you say mega-boondogle? 2. With credit tightening up for corporations because Uncle Sam is guaranteeing state and local bonds, the next step is Federally guaranteed corporate bonds. If you think the market is crazy now; just wait until investors try to figure out the winners and losers from Federally guaranteed funding. If you're a small start-up company with a promising product line and need capital to expand it's going to be bleak...I'm betting the only winners will be Federally subsidized companies, primarily in alternative energy or energy conservation. Now is not the time to come out on the market with a better mouse trap. 3. Considering the wild gyrations that will be caused by #1 and #2, it only seems natural that those teaming masses with retirement funds in stocks, are going to see some long years ahead at the old salt mine as they quietly wait for their nest egg to return to past valuations. Don't bother about investing more, with so much uncertainty in the markets, most people will be sitting on what little cash they have and hoping for a miracle. This of course means that #3 is really about the lowered expectations for the great mass of Americans. With good jobs soon to very scarce, and job security likely to be dependent upon Federal loan guarantees, look for most people to vote to perpetuate this looming disaster by keeping the idiots that brought it on in the first place in office. If I sound pessimistic it is because I am. Once upon a time Americans worked hard, scrimped, and saved to provide some financial security for themselves. They mostly looked to government to provide for the common defense, promote the general welfare, and secure the blessings of liberty for themselves and their posterity. Or something like that. Now we are come to a time when otherwise rational people are on the verge of becoming convinced; not that they can vote in posterity, but, that they can at least vote to get the Federal government to bail them out of austerity. Most don't understand that the "cure" as currently proposed is more dangerous than the disease it is supposed to cure. Considering the current "bailout fever" mentality at work in Washington the only ones not getting a bailout will be the taxpayers who managed their money wisely, invested prudently, and made the mistake of believing that those that were in charge were looking out for their own interests. That is enough ranting for one day. Take care.

At this point investors need to ask if the company can last with a collapse of earnings. The balance sheet in the assets to debt need to measure net positive assets to survive Armageddon. Today I heard the DOW CEO saying his stock price was insane. Not really, because their 10 billion in debt outweighed their 2 billion in assets. We all know for a fact that their last measure of assets with all asset classes going down to deflation is overstated. Therefore DOW is DEPENDENT on cash flow in an environment where vultures are waiting for the system to be cleaned of these worthless IOUs that are beyond the capacity of countries to handle. Roubini referred to the collapse of companies that are "too big to save." Even the IMF can't save all these emerging market countries. First the shadow banking failed. Now it collapses until the trend proves otherwise.

Hey Cody, Let me know when you decide to get back into money management. There is nobody anywhere close to wall street that I would rather work for. It looks like the hedge fund industry might implode this year. Of course the same guys will be back next year with a new fund and a clean record. I would hang on to the happy hour gig for as long as it offers something new to you; but after that, there will be so many opportunities for you.

Thanks for the info Code - we will await the word on when its time.