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Lee Munson and Patrick Kirts comment the S&P 500 price-to-earnings ratio. Part two of two. Published on Seeking Alpha

In part I we reviewed Standard and Poor’s earning estimates for 2009-10. They expect corporate earnings to continue with a slow climb throughout 2009, leading to a significant rebound in the trailing P/E in the fourth quarter, once 2008 losses are completely purged from the system. S & P’s scenario seems to assume that, once the 2008 losses are absorbed, a sort of muted business-as-usual will take over.

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Lee Munson and Patrick Kirts comment the S&P 500 price-to-earnings ratio. Part one of two. Published on Seeking Alpha

Standard and Poor’s is predicting that, for the first time, the S&P 500 will have a negative twelve-month trailing price-to-earnings ratio in the third quarter of 2009. The following chart compares five sets of data for the S&P 500 and its financial sector constituents, with actual earnings for 2007-8 and estimated earnings for 2009-10, in both as reported diluted earnings per share (with top-down estimates) and operating earnings per share (with bottom-up estimates).

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Lee Munson and Patrick Kirts comment on the market. Published on Seeking Alpha

We were not pleased to hear the unemployment comments from the Fed this week, and the love-fest with tech and financials are giving us a headache. However, before you think all we see is doom and gloom, keep reading for some signs of hope. This means nothing in terms of the reality TV show based on the economy called the stock market, but it does show that eventually, things will get better. If you have an understanding of how the structural improvements are taking hold, your ability to spot the new leaders is greatly improved.

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Lee Munson comment on market myths. Published on Seeking Alpha

In the Sunday Wall Street Journal, at least the part they sell to my local paper, the Albuquerque Journal, Dave Kansas furthered the already atrocious myths of Wall Street (see “You Still Need to Be in the Market “). The writer, and author of “The Wall Street Journal Guide to the End of Wall Street as We Know it”, would suggest that he sees though the common myths that keep ordinary investors down. He doesn’t, and I want to take issue with five different parts of Dave’s advice.

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Lee Eugene Munson and Patrick Kirts comment on the U.S. currency. Published on Seeking Alpha

I don’t quite remember when, sometime in the past year, I first began hearing average people say that the government ultimately has the power to fix the economy, because it can just ‘print money,’ but, in a few short months, the sentiment has become commonplace. It boggles the mind, but it now seems to be a truth commonly accepted by just about everyone–politicians, journalists, investors–even the man in the street. At Portfolio Asset Management this change in sentiment has altered part of our investing strategy. Gold is now back on the menu along with shorting treasuries. Alternative assets have gone to the top of our list of potential funds and the bond funds we hold are under tremendous scrutiny. The bottom line is that we are under fire–not by the market itself, but by the government policy of debasing the currency. Few are vigilant and the delay in the market reacting to the changes may take time. Meaning, some sound strategies may not work even though a rational investor would say otherwise.
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Lee Eugene Munson and Patrick Kirts comment on the market. Published on Seeking Alpha

Again and again, the cacophony of bottom-callers serves to lure the overly optimistic and the just plain ignorant onto the rocks of a sucker’s rally with their siren song. This is not to say that serious money cannot be made trading in this volatile environment; it can, and it is. We at Portfolio have never traded so much, but we’re riding the waves of folly, selling into these rallies, and picking up the pieces again when the waves break. This is evidently not what most people are doing, or there wouldn’t be sucker rallies.
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Lee Eugene Munson and Patrick Kirts present an economic outlook. Published on Seeking Alpha

Thomas Lee, US Equity Strategy at JPMorgan, generated some buzz in the past few days when he noticed that the twelve-year-low reached by the Dow last week had only happened two other times in history. The others occurred on April 3, 1932, in the depths of the Great Depression, and on December 6, 1974, after the first oil crisis. We now know that recovery in the market was soon to follow, and that the respective recessions ended four to nine months after, although unemployment had yet to peak. In both cases, the market popped and drew in the crowds. Is it really different this time, or is recovery right around the corner?
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Lee Eugene Munson and Lorraine Ell analyze the value of ETFs. Published on Seeking Alpha

When ETFs came on the scene 15 years ago, they brought a brave new world of efficient markets with low operating expenses and minimal tax liability. While the largest funds like DIA and SPY are designed in the spirit of the original ETFs, to track the large indexes, most of the newer ones do not even come close to this original purpose.

If the Efficient Market Hypothesis (EMH) is correct, then only two ETFs are needed at most, a world stock index such as the Vanguard Total World Stock Index (VT) and a bond index like the Vanguard Total Bond Market ETF (BND), in a ratio that fits your risk tolerance. Anything more, if we are to be philosophically true to the EMH, tips into the realm of active investing.
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