45% Sottovalutato


  By: rael on Mercoledì 17 Luglio 2002 01:41

Eccolo. The Bears Still Look Hungry By Peter Eavis Special to TheStreet.com 07/16/2002 10:32 AM EDT Capitulation, my foot. Monday's trading may have created one of the most gut-wrenching days in stock market history, but it hasn't brought equity values to a bottom. A broad market index like the S&P 500 must slide another 20% or more from here before it is properly valued. Chillingly, even after this year's 30% drubbing, tech stocks must lose half their current value to reach sensible levels. In other words, the S&P and the Nasdaq will both need to drop to around 700 before stocks hit a floor. The one piece of good news is that we're in the last leg of the postbubble correction. But as all action-movie fans know, the last sequence is always the bloodiest. The end is nigh, but it is also in sight. The bad guys in this story are yet to be slain: nosebleed valuations, earnings tampering and a hamstrung macro environment. (One big caveat: Despite the bleakness of the last few days, stocks almost certainly won't go straight down from here. Recall how long it took for the Nasdaq to hit Detox's target of 1500.) The Law of Averages Despite the selling, a substantial reserve of bullishness still exists on the Street. A clear sign of that is onetime bears like Bank of America's Tom McManus telling people to buy more stocks. Meanwhile, the Fed's monetary policy is extremely loose, and that is keeping the financial system intact -- at least for now. And the selling surely won't be done until we stop hearing the idiotic mantra that equities are cheap because they've fallen so far. On that yardstick, Adelphia, Enron and WorldCom are all screaming buys. Fundamentals drive markets over the long term, and they still bode ill. Don't be tricked by the argument that because we're trading at close to 15 times expected 2002 earnings for the S&P 500 companies, we must be close to a bottom. Fifteen times is close to the long-term average multiple for the index. Been a Long Time Nasdaq's five-year round trip Yes, the index is trading at around 18 times the $51.14 of forecast operating profits. And yes, these may be trough earnings for some sectors. But why are forecast as-reported earnings -- that is, earnings after certain charges and supposedly nonrecurring items -- so much lower at $35.47? Some of the gap has to do with thedifferent ways that S&P collects as-reported and operating earnings,but it is also because operating earnings generally leaveout goodwill writedowns that have been necessitated by the introduction of a new accounting rule. Now, there is some argument for keeping a chunk of those writedowns out. But these won't be the last goodwill writedowns we see; as accountants are forced to do their jobs properly, such charges to intangible assets are likely to become a lot more regular. Quite right, these may not be cash charges, but in most cases it took cash to buy or build those assets in the first place. For those reasons, it makes sense to factor in some of the goodwill charges. Very roughly, that could be done by taking a midpoint between as-reported earnings and operating earnings. That gets us to around $43 in S&P 500 forecast 2002 earnings. Multiplying that by the 15 multiple makes 645 -- close enough to Detox's 700 target for the index. Tank McNamara At the same time, tech stocks have to continue tanking. If we use the S&P 500's information technology sector index as a rough yardstick for tech names, the sector is trading at an absurd 38 times forecast 2002 operating earnings. If we halve that multiple to 20 times, that sector index must also fall by 50%, all else being equal. And 20 times is an aggressive valuation for a sector that is crawling out of one of the biggest busts in history. Apply the halving principle to the Nasdaq and you're at 700 once again. Of course, any discussion based on earnings assumes we can trust the profits numbers that are reported. As we have seen, that's about as advisable as letting Hannibal Lecter babysit your firstborn. The bulls will retort that once the SEC's deadline passes this fall for CEOs to pledge that their company's numbers are clean, the market will be able to rally. But who's to say the liars won't keep lying? The wording of the pledge is loose enough to let a top dog weasel his way out if chicanery is exposed later. And even if generally accepted accounting principles are adhered to, the stuff called earnings may bear little relation to what is generally thought to be profits. Actually, it's not even clear that professional money managers know what profits are, given the extent to which postmodern blurriness has infected institutional investors. It's quite mystifying why the head of, say, the Janus Twenty fund hasn't been dragged before Congress for losing billions in mom and pop money. Why the brokers and the accountants and not the people who actually destroyed the wealth? Fed Up Completing the nightmare, the Fed can do little more and is looking more and more like the Bank of Japan each day. It has cut rates like crazy and unleashed an unprecedented credit boom -- even in the midst of an economic slowdown, a phenomenon few economists can explain. But this lending bingewon't offer much lasting help, because all it has done is inflate prices in the housing and services sector, shore up demand for autos and make it much easier for the government to suddenly run up a huge deficit. All those uses are consumptive and divert resources from productivity-enhancing investment. What's more, firms are too debt-laden to go back to '90s-level investment spending. As Alan Greenspan massively raises the supply of dollars, the greenback's price -- surprise, surprise -- is falling against other currencies and gold. It's easy to see why foreigners are heading for the exits: First, in this postbubble, overleveraged environment, the opportunity for good returns has diminished. Moreover, the Fed is deliberately cheapening the dollar that the outsider eventually aims to get paid back in. But the domestic investor has stayed relatively faithful. Sure, individual flows into the market are way down, but mutual fund flows are still strong, in large part because of the captive 401(k) flows. A reversal of those flows will be the next shoe to drop. And it will trample stocks still further. Capitulation means surrender. And the bears can still safely cry: "No surrender!" Even after a day like Monday.


  By: banshee on Martedì 16 Luglio 2002 23:18

No, mi dispiace! Il pezzo me lo ha allegato Rael ad una mail. Se ricordo bene da quando ero abbonato, ci deve essere una funzione di ricerca per autori in home page. Altrimenti, spero che Rael sia collegato.


  By: GZ on Martedì 16 Luglio 2002 22:55

ok occorre solo riassumerlo un attimo per chi non legge l'inglese o ha poco tempo di studiare banshee non ha la passw per metterlo in home page ? (io non lo vedo)


  By: banshee on Martedì 16 Luglio 2002 22:48

Per par condicio io invece suggerisco calorosamente la lettura del pezzo di Peter Eavis, edito oggi su Realmoney, segnalatomi da Rael. Chi è abbonato lo troverà facilmente in home page. Consiglio soprattutto di fare ben attenzione a quanto dice in uno degli ultimi capoversi. Cosi', tanto per fare giustizia di amenità del tipo che gli Americani si siano stancati di pagare per noi (e per il resto del mondo, s'intende!).

Sottovalutato del 45% - Gzibordi  

  By: GZ on Martedì 16 Luglio 2002 22:39

Questa probabilmente è la stima più ottimistica della situazione che ho letto. Chi scorre il wall street journal forse ieri l'ha vista e la metto qua così uno la legge e alla sera dorme contento. E' di Arthur Laffer, che è stato l'architetto della politica economica della casa bianca negli anni '80 (il tizio che ha inventato la supply side economics) e che fa consulenza finanzaria per fondi e istituzioni. Laffer dice : non guardare ai bilanci su cui ora ci sono tante discussioni. Guarda ai dati della contabilità economica nazionale come risulta dalle tasse pagate. (National Income and Product Accounts, compilati dal Department of Commerce's Bureau of Economic Analysis (BEA)). Se si fa uno studio degli ultimi 30 o 40 anni degli utili aziendali in base a questi dati, che sono i più attendibili che ci sono in america, non ho ovviamente i profitti un poco gonfiati del 1998-2001. Ma vedo una serie storica degli utili aziendali che, divisa per i tassi di interesse, mi da la "capitalizzazione" vera della borsa americana. Secondo Laffer (vedi grafico in fondo) questa serie degli utili reali non è variata di molto negli ultimi anni nella sua crescita (perchè non sono quelli che le aziende mostrano agli analisti, ma quelli che entrano in contabilità nazionale). Quello che è variato molto è l'andamento dell'S&P 500 che però ora continua a scendere mentre gli utili aggregati continuano a salire. La conclusione è che facendo questi conti alla fine l'S&P 500 è sottovalutato del 45% circa. (Notare che il modello IBES che usa gli utili previsti medi e che utilizzano in tanti lo da a uno sconto del 30% circa) A Buying Opportunity By ARTHUR B. LAFFER For two and a half years now asset values and the economy itself, to a lesser extent, have been in a tailspin. From their early 2000 peaks, the Dow Jones Industrial Average is off by 25%, the Standard & Poor's 500 by 40% and the Nasdaq by 73%. With 20/20 hindsight, everyone now seems to agree that asset values were too high in early 2000. But if stock prices were too high back then, how do we know when they have fallen enough to warrant increasing exposure to equities? Without dwelling on the past, no matter how tragic it may have been, the real question is, what do we have to look forward to? Having no psychics on staff nor a direct line to God -- unlike some of my colleagues -- the way I try to range the stock market is by comparing capitalized economic profits to the S&P 500 Index. And, to cut to the chase, right now equities are dramatically undervalued relative to capitalized economic profits -- more so than at any time over the past six years. This means we're due for a significant market run-up. U.S.A. Inc. To illustrate how the market valuation model works, I like to imagine the U.S. as a single company and myself as an investment banking firm. If I were asked to take U.S.A. Inc. public, I'd, of course, say yes. All investment banking firms want the fees. Once the deal points were agreed upon, my task would be to figure out what U.S.A. Inc.'s market capitalization/enterprise value/initial public offering price should be -- a formidable task to be sure, but a task investment banks do every day. And the way they do it is quite straightforward. The first question an investment bank would ask is, does U.S.A. Inc. have profits? The answer is a resounding yes. In the National Income and Product Accounts, compiled by the Department of Commerce's Bureau of Economic Analysis (BEA), you'll find the best profits data available. Here literally scores of professionals take the tax returns of corporations (some five million at present) and put them on a consistent accounting basis. Because the BEA data are based on the tax returns of corporations filed with the IRS, and the BEA does all it can to eliminate reporting anomalies, these data are virtually unaffected by all the flim-flam financial accounting practices used by many companies of late. Now, with economic profits data in hand, a good investment banking firm would then want to know if there are any comparable market data that would allow it to capitalize U.S.A Inc.'s profits in order to estimate the appropriate market value of U.S. corporations. And, again, the answer is yes. We have bond and interest rate data for the U.S. that go back to the original 13 colonies. The price of a bond divided by its coupon is a price/earnings ratio, pure and simple. So, to get a first order estimate of what the market capitalization of U.S.A. Inc. should be, we need to capitalize economic profits by using the appropriate discount factor, which I take to be the yield on the 10-year U.S. government note. By dividing any given quarter's economic profits by the average daily 10-year note yield, we can calculate capitalized economic profits, which is an estimate of U.S.A. Inc.'s market capitalization. Carrying out this calculation quarter by quarter back in time, we have a time series of what an investment banking firm would estimate the market capitalization of U.S.A. Inc. to be. And, in addition, we have actual market capitalization data in the form of stock market indices. Comparing actual stock data with capitalized economic profits (see chart nearby) yields a measure of either overvaluation or undervaluation of the market, or perhaps expectations of things to come that aren't already in the data. Just viewing the plot of the two series illustrates the remarkable closeness of fit. On a more careful viewing, all sorts of interesting features pop up. The lack of confidence in U.S. economic policies in the mid-1970s is obvious from the huge gap between capitalized economic profits and stock prices. That gap shouldn't surprise anyone who remembers the gas lines, federal marginal income tax rates of up to 70%, inflation rates in the teens, a 21% prime interest rate, race riots and worker strikes. Yikes! The huge surge in both series in the early 1980s, once Paul Volcker's and Ronald Reagans' policies kick in, is readily visible, as is the 1987 market bubble and subsequent crash. Even George H.W. Bush's and Bill Clinton's tax increases are apparent. Also visible is the Y2K bubble. Back in late 1999 and early 2000, the Federal Reserve and others believed there was a serious Y2K problem. Anticipating widespread computer failures and runs on banks, the Fed expanded the monetary base dramatically to ensure that banks would have adequate funds on hand to meet deposit withdrawals and avoid a financial panic. The expanded base, however, also led to an explosion in asset values and excessive real growth as banks were no longer reserve-constrained from making loans; thus the high-tech bubble. Then, doing exactly what it should have done given its earlier mistake, the Fed removed all of the excess base in early 2000, and the entire process reversed. Asset values fell, the economy slowed and interest rates retreated, and, as if that weren't enough, the events of Sept. 11 and the subsequent accounting crisis "piled on." Undervalued This brings us to today. For those who like price/earnings ratios, the conclusion is simply that stock prices are uncommonly low when compared to bond prices and properly reported corporate profits. The price of a bond in relation to its coupon is not only the inverse of that bond's yield, but is itself a price/earnings ratio. When yields on bonds fall, price/earnings ratios should rise. Given what's happened to interest rates, price/earnings ratios should also rise. But as of today, stock prices have not only not risen, they have fallen way out of line with corporate profits and the current level of interest rates. Edited by - gzibordi on 7/16/2002 20:42:18