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  • Forward P/E ratios are pointless, as they look at future numbers, which in current times are pretty hard to predict given the overall uncertainty and the ways a recession will play out;

  • And excluding financials from the ratio is disingenuous, given how they made up 40% of overall corporate profits in recent times

  • Betting on lower oil prices has been the conventional contrarian wisdom every one of the past 5 years. I'l still not convinced that even a recession will bring them down;

  • corporate defaults are at record lows precisely because of all the easy financing they could get before the credit crunch. Now that credit is no longer available (at all, or on such favorable turns), it's not clear how things will turn out. Many companies have sound balance sheets and no need for finance, but many do have that need, and the market won't provide.

Their last sentence says it all: 'the experience of the past 30 years'. The past 30 years have been one long bull market. How relevant is that as we move to another phase of a very long term cycle?

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sat Dec 22nd, 2007 at 11:26:01 AM EST
Many companies have sound balance sheets and no need for finance, but many do have that need, and the market won't provide

As we have said in previous threads, it's start-ups and SME's who are going to be hardest hit.

Credit - as well as equity - is necessary for development: since banks won't be providing it, we'll have to think of something else......

"Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky

by ChrisCook (cojockathotmaildotcom) on Sat Dec 22nd, 2007 at 11:39:23 AM EST
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