Hail to the Investment-Adviser-in-Chief!
Today's Financial News - Posted March 4, 2009
President Obama is hanging out his shingle as an investment adviser. But the trademark “eloquence” only thinly veils a profound lack of knowledge about terminology and investing concepts.
by J. Christoph Amberger
Baltimore—TFN: A day of good news: The Commander-in-Chief has become Investment-Adviser-in-Chief as well.
“Profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long-term perspective on it,” the President told his adoring public.A daring prognostication, especially for someone who cashed out his 401(k)s years ago.
Now, if his predecessor had voiced such assessment, using the same terms, this gem would’ve been a keeper for the Big Book of Bushisms. Since standards are different (double even, some claim!) and finance isn’t really the bailywick of the Adulatory Corps sitting in at White House press conferences, it went unnoticed.
Which is a pity, because it would give our media something other to investigate than Michelle Obama’s exercise regimen for her upper arms (CNN), or what soft drink the White House prefers. (Is it Coke? Is it Pepsi? Let the investigative machine at Time magazine razzle-dazzle you!)
You might wonder, for example, what a “profit-and-earnings ratio” is. Is it Obamaese for P/E ratio? Or is it “profits,” then nothing for a while and then “earnings ratios”?
It would be nice to hear where exactly the Anointed One is seeing either: Banks, insurers, car manufacturers, retailers are posting record losses, not profits. Las Vegas casinos and their tillers were empty even before Obama nixed taxpayer-paid stimulus via corporate travel. Small airplane makers in Wichita are laying off workers by the thousands since Congress branded travel by Lears jet un-American if undertaken by private entities. Newspapers are shutting down. Real estate brokers are applying for teaching positions. States and communities are deep in the red.
So what “profit-and-earnings ratios” are we looking at? Really, the only industry logging respectable sales growth since last November are gun manufacturers, who saw order books grow by just shy of 50%.
And not because Americans are all a-giggle over their realistic expectations of Obama.
Let’s assume, for charity’s sake, that he really means P/E ratios.
Sure, they went down… something value investors are eager to see in a stock during boom times. In many cases, stock prices went down even faster than earnings. But in many cases, P/E ratios disappeared altogether from your favorite online stock rosters.
You see, once there are no earnings, the formula becomes useless for all practical purposes: Even in the Obama New Math, you cannot divide by zero. And the stock of a company with no earnings is a pure speculation on its future success.
Is that what he means?
But for a company to be successful in the future, people have to buy its services and products. I’ve been watching colleagues bringing in bag lunches rather than go to Subway or Kerrigan Kitikul’s Thairish noodle joint at the corner. (Best chicken pad Thai in town!) I read newspaper articles how people should stop spending on books and videos by using their (out-of-funding) library more. I even see the White House Fairy Godmother Oprah advertise a show whose theme is “Spend Nothing”.
Now let’s assume that people magically start spending again. Even under Obama, profits still are what’s left of revenues after deducting costs. Costs like higher taxes. Healthcare co-pays. Social Security contributions. Minimum wages. Carbon taxes. Each and every line item on the cost side is scheduled to soar under the new budget.
Again… what profits is he talking about?
Given the timing, I’m almost convinced he could only refer to Andy Snyder’s top options play! Please follow this link…
Next Article: Banks going broke? Charge them more
Posted by J. Christoph Amberger · Filed Under Featuring..., US Stocks and Markets
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March 4th, 2009 at 10:07 pm
The Commander-in-Boob really means P/E ratios. Profit and earning ratios?
No! P/E means PRICE to earnings ratio. NOT PROFIT and earning ratios!
That is why he is The Commander-in-Boob and knows nothing about markets.
That is why we have DOW 6900
The Commander-in-Boob has no clue
March 5th, 2009 at 1:33 am
[...] he’s a lot nicer about it than J. Christoph Amberger [...]