20 April 2006

"A Lot More Inflation Coming Down The Pipe" by Ceri Sherpherd 04/19/2006

FSU Contributor:  "A Lot More Inflation Coming Down The Pipe" by Ceri Sherpherd 04/19/2006: "Go back 2 years and the GAAP PE ratio on the S&P 500 was close to 40 now today it is 18.85 this is the only PE ratio that matters the Pro Forma numbers are simply fantasy and are totally irrelevant. In this short time period the market has moved from suicidal overvaluation to simply historically expensive. The major part of the increased S&P 500 earnings has been nothing more than inflation and accounting gimmicks; real sustainable growth has only played a minor part. Very soon the Stock market will have historical PE ratios that will make it a good long term buy, not quite yet, but at the rate of Dollar destruction we are witnessing at present this time will be far closer than most people expect!
If you believe that they are going for Option 3 above then you must also be a raging commodities bull, this is because commodities are priced in Dollars. If the unit of measure is constantly devalued more units of the devalued currency are demanded by the market for real tangible physical commodities. The supply of nearly all commodities is somewhat inelastic. The supply of printed and electronic Dollars is unlimited and virtually instantaneous.
It is fashionable for the last 10 years or so for the media to talk about the great NASDAQ bull or the Housing Boom or even Peak Oil apparently showing itself by $70+ Crude. The real cause of these booms is the Federal Reserve Bank. Too much cheap money chasing too few stocks houses and now Oil.
They asked J P Morgan in 1913 at a Senate Select Committee Hearing what is Gold. He replied that “Gold is money, and nothing else is”. In real money terms in true GOLD STANDARD terms we have at present a severe Bear market in Stocks just look at the graph above and Real Estate and a weak Bull market"

No comments: