Deploying Corporate Cash
Earnings Estimates and Valuation Drivers
Stock Valuation Measures: S&P 500 Index
Source: BLS, FactSet, J.P. Morgan Asset Management.
Data reflect most recently available as of 6/30/11.
Source: JP Morgan funds
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
"Dollar depreciation leads to higher inflation and ultimately forces foreign creditors to question their rationale and indeed their sanity for continuing purchases of U.S. Treasuries." -Bill Gross
Signs continue that European markets are getting tired. The Spanish and Italian stock markets, big beneficiaries of the sharp decline in their bond yields over the past few months are falling to the lowest since Feb 1. The European bank index is at a 1 1/2 week low after earnings reports from Commerzbank and Credit Ag (RBS bouncing although reporting weaker than expected earnings) were disappointing. This market action is in spite of the German IFO business confidence figure which rose to a 7 month high coming in a touch above expectations and Italian consumer confidence which bounced more than...
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August 29th, 2011 at 9:40 am
I’m not sure what to make of this series of charts and am probably missing something. I suppose it shows that corporations are reluctant to invest within themselves given the times in which we live.
Perhaps the stack of cash on the corporate sidelines is the best use of profits for now. I know my investment position is anything but “all in” until a definitive change in the economy (and the bizarro world political climate) is displayed.
It is easy to dump on corporations for not utilizing cash aggressively, but how many of us are doing the same thing with our portfolios?
August 29th, 2011 at 10:53 am
The source is JP Morgan Funds? I can’t really believe they don’t know better. Thus, I’ll have to assume they are lying deliberately in their graphs and tables to make stocks appear cheap compared to P/E ratio. They assert the average P/E ratio is 16.4. But this is the average P/E for reported earnings based on GAAP. This is not the historical average of the forward operating P/E. The historical average of the P/E based on forward operating earnings can’t be the same as the one based on GAAP earnings, if P is the same, but not the E. Reported operating earnings are systematically higher than GAAP earnings. Forward operating earnings are even higher biased than reported operating earnings, since analysts systematically overestimate earnings averaged over the whole business cycle. Since forward operating earnings are systematically much higher than reported GAAP earnings, the historical average for the P/E based on forward operating earnings must be way lower than the 16.4. It’s simple arithmetic.
So what was the purpose of the post?
August 29th, 2011 at 11:09 am
Barry, how do we paste charts in the comment section? Can you install somekind of plugin to help us post charts in reply?
I wanted to put up charts on Apple. Apple has 74 bn cash probably reflecting JPM talks about in the post above.
Here are some charts on Apple when we issued the trade to buy APple on AUG 25.
http://capital3x.com/?p=243
A great of the call to buy apple wa that nearly $100/share reflect cash on Apple books.
August 29th, 2011 at 11:28 am
they should buy long dated treasuries to help Bernanke keep interest rates lower.
August 29th, 2011 at 11:58 am
This money belongs to the great, the good, the alabaster-white pillars of the community, the church-going family men, whose sweat and hard work atop these engines of employment and investment in the future help their fellow citizens …who eschew the legal maneuverings and anything that smacks of un-Americanism, secession, sedition, and the like .. who happily promote the greater good, who give selflessly to all regardless of race, creed, or political affiliation.
It’s theirs. The money belongs to them. They need bonuses – this money – no, and into the future, to be properly incentivized to invest, hire and create.
Raise the pay of the men at the top. if we don’t we will be sorry. And cut their taxes too, so they will know that American is on their side.
August 29th, 2011 at 1:04 pm
It would be much more useful to look at the spread of P/E over prime. My guess is that that is a more useful way to judge what “average” P/E really is, and probably shows a lot less fluctuation. It would really express the implied risk premium for ownership of shares over “risk free” investments.
August 29th, 2011 at 1:11 pm
This is a year old, but I can’t imagine much has changed.
http://finance.yahoo.com/banking-budgeting/article/110218/the-biggest-lie-about-us-companies