Calls of "overbought" and "overvalued" and "extended" are raining onto us à propos the stock market. All true, except the "overvalued" claim. Those pundits point to current PEs. That one is so imbecilic as to almost be ignorable. Driving using the rear view mirror as a primary visual indicator would be considered rather stupid by everyone. Anyone looking at long term charts showing stock prices and earnings in prior severe recessions would "know" that the PE is the trough is irrelevant. What matters are earnings one year in the future.
So what are earnings going to be in 2010 ? A small gain over 2009 trough earnings ? Or a small discount from 2006 earnings ? Or what ?
My Obama Fund is predicated on 2010 earnings being the latter. The bears would say sell the rally since it will be the former. The distribution of expectations is what makes markets volatile as one group takes command, then the other, sort of like a closely matched bout of boxing.
But looking at charts, one can see instantly that all the market has done in this rally is recover to its levels of the fall of 2008. The Obama inaugural sell-off has been reversed. That's it.
Futures are down this morning. Good. Maybe I'll get a good pullback to load up again.
I am also studying the natural gas market. Obama's greenie nonsense "might" make many coal plants shift to natural gas. I've heard anecdotal evidence of that. And with a whiff of industrial demand, that market's glut might get taken up. Natural gas rose a lot last week, about 20% from the lows. That might just be short covering, hedging or new longs. The natural gas ETF saw big increases in volume. IF I do anything, it will NOT be to buy that ETF. It's a loser for anything but short term trading as the monthly rolls kill it.
I put some money back into my commodities account and would buy some more distance futures. IF I decide to do it. I have lots of study to do before that.
Word of the Day
"Jejune" - adjective [$10]
Jejune means 1. lacking nutritive value; 2. lacking interest or significance; 3. lacking maturity: puerile.
Sentence: Writing on the news pages of the Wall Street Journal has sunk to the jejune level of sophomore* journalism clases.
*see bonus below.
Le Mot du Jour
"Éxiger" - verb, transitive, conjugates like manger.
Éxiger means to erect, to set up, to establish (+ en ); S'éxiger means to set oneself up.
La Phrase: Des dirgeants européenes veulent éxiger le socialisme d'État en model pour l'economie du monde. Ils ont tort.
Sentence: Some European leaders want to set up state socialism as a model for the world economy. They are wrong.
*Bonus: a durable 5,000 year old concept: the "sophomore" and the "sophmoric".
The English word for "sophomore" derives from the Greek compound word, "sophos-moros" meaning "clever fool. It was first used in English in 1688 in Cambridge. BUT there is a Sumerian word transliterated as "galam-huru" that means the identical thing - "clever fool" - literally. The word is used in an essay in Sumerian literature that is a type of verbal contest between higher level students and lower level ones.