As always, a short, yet precise, comment that really focuses in on the heart of the matter.

As this is a belated comment, in case you do still see it, a question:
Next to the lack of capitulation that always accompaines bottoms, what about the simple metric of bottom P/Es?

To my knowledge, in virtually all instances comparable to this decline (are there many that compare) the S&P’ s P/E has gone well BELOW its long term average of 12-15, to hit about 6-8 at the bottom. Yet today, we are still well ABOVE the LTA, I don’t have access to the numbers as you do, but I think that the CURRENT P/E is still above 20.
So of course, if the market had seen its lows already, we could still get to an 8 P//E if earnings go to about $100, a mere 150% increase over the current number
Now how likely is such an earnings outlook?

Rick, do you think this P/E metric in its simplicity for bottom evaluation is comparable to your friend’s as sketched out above?

Personally, I think there is a good case in waiting for the Dow/Gold to go from 9 now to maybe 2-3.

As I am penning this in the wee hours of Eastern Sunday, a happy Easter to all (and holidays of course)!

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The P/E multiple is a wildly variable number that ultimately reflects investors’ state of mind as it swings between cyclical extremes of fear and greed. Given the historical excesses of greed that we have seen in this last cycle, it seems likely that P/Es are about to fall to historical lows as fears mount. That would suggest that earnings multiples have quite a ways to fall from current levels, especially since collapsing earnings will be pushing P/Es much higher over the next year or two. RA

2+2=5 has been the rule in America for an extended period and today’s economic pain is really just the beginning of the equation shifting to 2+2=3 in order for the economy to obey the laws of mathematics.

2+2=3 means extreme economic pain and that will have to be the rule in America for an extended period. If the money masters insist on more bubble blowing then we will eventually have to endure an excruciating period of 2+2=2. Nothing less than the end of the laws of mathematics could stop the eventual rebalancing.

Read this article:
The “Disaster Stage” of U.S. Financialization
By Kevin Phillips
http://tpmcafe.talkingpointsmemo.com/2009/04/07/the_disaster_stage_of_us_financialization/

I’m playing it with low cash levels now, but I know this is a mirage. This is an intermediate term BEAR market rally which in all likelyhood will peeter out in the fall. Then I see the bears ravaging this market until the capitulation selling guts this market. Only when you have rising employment, low pe valuations, rising earnings/dividends AND a plausible economic theme like rediscovery of the light bulb or some other like minded paradigm shifting entity, will it be safe to long term invest again.

I dont see long term investing coming back for at least another 5-10 years. In the meantime you will probably see bear market rallys-flat markets as the indices tack ever lower.

As far as gold goes. Well the safety folks are leaving the trade and getting back into the equities market. I think gold could go back into the high 700s before you see a snap back on inflation concerns. So if your a gold fundy hang in there, you know why you’re there. If you’re a trader subscribe to Ricks service and game the market.

What is dreadfully interesting is the “way” this downward cycle has occurred and the type of issues that have not hit the public. I think this will pan out much much worse yet for these reasons: FIRST, there is no apparent panic in the population at large, I see no “fear”, SECOND, Randy points out that the guys in at the beginning are still holding on, therefore their exhaustion selling will begin at some time (are stocks going to go up 25% in the next 2-5 years??? Not unless we have a boom time again!), THIRD in Oz we have a retirement superannuation scheme of 9% of income (401k for our Yanki mates?), that saving MUST be invested in certain types of investments, so these schemes are artificially driving up prices due to artificial demand in a limited number of investments (the 9% is a mandated minimum, you have no choice on the Min, but can do more), THIS forces up prices TWICE above current inflation and therefore over 10 years has driven selected markets sky-high with an artificial demand. FOURTH, I see NO PAIN in the average person yet… not disrespecting our unemployed and retrenched brethren, the AVERAGE Joe is seeing NO real pain, I’m seeing everything I need on the shelves, I’m able to buy everything I want without delay and the quantity of traffic on the roads has not changed one percent – its arguably worse. There is NO short supply YET. With respect Randy, I believe once you see the price of a steak go up, when you cant buy a fresh Leak or fresh Thyme for a Sunday roast, or some other oddity like your favorite Laksa sauce disappear permanently then you will know these restrictions are real and therefore the real depression is starting to bite…. then its sell time baby, sell…. (I tried to use American spelling! excuse me if I made a mistake!)

I think there are too many americans in these plans with too much blind faith hoping for a rise that just might take too long to come. Remember ma and pa investors, when you lose 50% on your portfolio, you need to gain 100% to get it back. Maybe you should be capitulating.

And one last note. Perhaps this is another Argentina “rob the retirement fund scam” just using another method to transfer the wealth.

Niko Santorini
Greece