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Securities Analysis

How much are US equities over-valued?

A rush to exit the stock market ...

Commonsense analysis shows that US equities are at least 40% overvalued, a conclusion supported by many academics and John Burr Williams’s formula.

This suggests that many retirement plans, based on equity investments, may be in trouble, if (or better, when) stocks fall to reasonable values.

This article, using John Burr Williams’ famous formula, shows how the market may be valued.

US Equities

Are stocks over-priced or a bargain?

Two ways to see things

Depending upon your point of view, the US stock market is either vastly over-priced, or a great bargain — and if you have a split personality, you could both be right!

This peculiar state of affairs occurs because two radically different yardsticks can be applied in measuring corporate performance: one based on an unquestioning respect for Generally Accepted Accounting Principles, and the other based on commonsense, an appreciation for cash in hand, and the time-honored principle of, ‘What’s in it for me?’.

Harvard Business School

Breakthrough Idea? Do not pay dividends!

Why should I pay dividends?

The Harvard Business Review of February 2007, featured a list of “Breakthrough Ideas for 2007″ that shed light on the regard that US business executives and their mentors have for stockholders. The HBR recommendation was that executives who found their company with too much cash and who didn’t want shareholders to find out that they did not know what to do with the money, should speculate in the takeover market, even though this was extremely risky and lacking opportunities. The obvious solution, “pay dividends” was ruled out as embarrassing.

Featured articles on inside pages

Stock buybacks

Warren Buffett attacks buyback schemes

In the 2005 Berkshire-Hathaway annual report, Warren Buffet points to the unethical aspects of the buyback-option schemes so common in the US stock market. He noted that "Too often ... the deck is stacked against investors when it comes to the CEO’s pay. ... every dime paid out in dividends reduces the value of all outstanding options"
More ...

Securities Analysis

Can index funds protect you against inflation?

Historical evidence suggests that equities do not offer fool-proof protection against inflation. Inflation brings high interest rates, confounds accounting practices, and is associated with bad government. More ...

US Politics

The decline of mainstream media

In September 2009, President Obama dominated television in his attempt to sell his government-run health plan, despite massive public opposition. Mainstream media has falling revenues and market share as people turn to unbiased sources. More ...

US equities

Do stocks offer protection against inflation?

There is a common belief that a managed, diversified portfolio of US common stocks provides protection against inflation. However, there is reason to question whether this protection currently exists.
More ...

US Bonds

Bond demand exceeds supply for a decade

Over the decade, 1995-2004, the demand for US bonds of all types has surpassed new bond issues in eight of the last ten years. This is the reason that bond prices have held firm, even in 2003, when net new issues reached almost $1.8 trillion. More ...

World Economy

What Is ‘International Liquidity’?

It used to be that the term 'international liquidity' meant the relative amount of resources available to a nation's monetary authorities that could be used to settle a balance of payments deficit. In the days of the gold standard, this would mean access to gold that could be used to redeem a nation's currency held by foreigners. More ...

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2011-02-23 16:02