His commentary is rather long, so it is not convenient for me to post the whole article here. This is his real punch line:
My transgenerational stock market outlook is this: stocks are cheap when valued within the context of a financed-based economy once dominated by leverage, cheap financing, and even lower corporate tax rates. That world, however, is in our past not our future. More regulation, lower leverage, higher taxes, and a lack of entrepreneurial testosterone are what we must get used to – that and a government checkbook that allows for healing, but crowds the private sector into an awkward and less productive corner. Dow 5,000? We don’t have to go there if current domestic and global policies are focused on asset price support and eventual recapitalization of lending institutions. But 14,000 is a stretch as well. One only has to recognize that roughly 20% of bank capital is now owned by the U.S. government and that a near proportionate share of profits will flow in that direction as well. Better to own corporate bonds than corporate stocks, but that’s a story for another Investment Outlook.
You may read his whole article by clicking this link:
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/IO+Dow+5000+Gross+Dec+08.htm
Coincidentally, I saw this chart:
We can see Dow is getting cheaper in Dow/Gold ratio but not as cheap as 1982. You may note that from 1982 to 2000, commodities stuck in a recession for almost 20 years. It also means that post 2000, commodities have a lot of room to appreciate. That is why most believe the commodities bull run is not over until 2018 - 2020.
Is this the death of equities? No, if you are a first class market timer or a stock picker. Will talk more about this later.
No comments:
Post a Comment