Saturday, April 04, 2009

For the record... 
Things have come to pass much as I had predicted.

From last October:

Forward P/Es are down around the 13 level, according to the Morningstar data on the Vanguard 500 fund, which I'm using as a quick proxy, with a dividend yield of around 2.47%.

Not too bad, but those forward-looking estimates were assuming normal times, and I would have to regard them as obsolete. I think the actual earnings next year will be quite a bit less than projected, and the real P/E is closer to 20x earnings right now, looking forward. So forward multiples will expand (because of declining earnings), or stocks will continue to fall until the the ACTUAL P/E, looking forward, is 12 or less (based on dividends of 2.5% or less.)

A big chunk of dividends will disappear, as financial services companies...most of them dividend payers themselves, struggle to recapitalize by retaining earnings.

Nevertheless, look at Bank of America, now trading at 11.5x earnings, with a yield of 12.27%! Very tempting, although that yield I suspect will fall, as BofA shores up its balance sheets. It may stop altogether for a while. And of course, as every stock investor should ALWAYS keep in mind, it COULD go to zero!

And from March of 2007:

Looks like bonds will be under pressure. Real estate will be under pressure. International stocks will be under pressure (actually, already are). Growth stocks will be under pressure. Is this the Perfect Storm?

I can't wait.

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