Overvalued & Underbought

With all the bad news that has been dumped upon the economy for some reason the stock market is going up. Why?

The SEC (Securities and Exchange Commission) has just set up new guidelines for core earnings. No more proforma computations. You know what proforma means - the company CEO or Treasurer waves his magic wand and says this is what I expect to appear as soon as I let the genii out of the bottle. And pigs can fly. These imaginary numbers may give his company a Price/Earnings ration of 20 which is pretty good by today's standards.

Now those mean guys in Washington have said you must reevaluate your earnings but this time figure in your stock options, pension costs and any restructuring charges. Holy Cow, that makes the P/E ratio 37. And that ain't no bargain when you are buying stock. The 100 year average has run about a 14 P/E. If the company has not been paying any dividends then this is a stock that must be suspect for any long term holding.

Because of these new guidelines the entire S&P Index P/E has gone from a 33 to 49. That is much better than it was in January 2002 when it reached 69. This number makes the entire market overvalued and still leaves me with the question of how can the market advance using these high P/Es?

There are a couple of answers and neither may be the right one.

The market has become severely oversold. The bear people have been riding it down until the news media finally recognized we have a long-term bear market. There have become too many traders who think there is no bottom and are willing to sell anything and everything. Enter the trading bargain hunters. It will now be the bears turn to be punished.

It takes money to put the market up. Where is that coming from? Our white knight, Sir Greenspan, has come in with his bags of money this past week. Look past our borders and you will see stock exchanges in every major country in the world that look sicker than ours. Foreign investors want a new home for their money and it seems the U.S. market looks darn good. As that money has started buying you may begin to see pension plan and mutual fund managers coming into the market.

The talking heads on TV and radio will give many other reasons that can be fueling the market advance and they may also be correct. Our market may be overvalued as we see it, but to others it looks like a bargain. Money is always looking for the greatest return and with wire transfers billions of dollars can and does move in a matter of hours. Oversold to the foreign market traders means underbought. It seems they have put on their buying clothes and want a piece of the action as our market is headed up - at least for a while.

(c) 2005

Al Thomas' best selling book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter to receive his market letter for 3 months at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.

no-contract cleaning service Mundelein ..
In The News:

Researchers exploited WhatsApp's API vulnerability to scrape 3.5 billion phone numbers. Learn how this massive data breach happened and protect yourself.
Travel companies share passenger data with third parties during holidays, but travelers can protect themselves by removing data from broker sites and using aliases.
Xpeng's humanoid robot moves so realistically that crowds believed it was fake, marking a major advancement in robotics technology ahead of 2026 commercial launch.
Researchers discover phishing scam using invisible characters to evade email security, with protection tips including password managers and two-factor authentication.
iPhone and Android users can reduce battery drain and data usage by restricting Background App Refresh to Wi-Fi connections instead of mobile networks.
Scammers nearly stole an Apple account by exploiting the support system with authentic-looking tickets and phone calls, users can protect themselves with safety steps.
FoloToy restored sales of its AI teddy bear Kumma after a weeklong suspension following safety group findings of risky and inappropriate responses to children.
Threat intelligence firm Synthient uncovers one of the largest password exposures ever, prompting immediate security recommendations.
Viral video shared by Elon Musk shows Tesla's Optimus humanoid robots performing tasks from cooking to construction, garnering over 58.5 million views on social media.
Chinese hackers used Anthropic's Claude AI to launch autonomous cyberattacks on 30 organizations worldwide, marking a major shift in cybersecurity threats.
Apple's new Sleep Score feature gives you a rating for your nightly rest quality. Learn how to set it up on your Apple Watch and iPhone today.
Essential phone settings to enable before losing your device, including Find My network, location services and security features for iPhone and Android.
The Fox News AI Newsletter gives readers the latest AI technology advancements, covering the challenges and opportunities AI presents.
Cybersecurity research shows weak passwords remain a major threat, with simple patterns and number sequences putting millions of accounts at risk.
New Android malware BankBot YNRK silences phones, steals banking data and drains crypto wallets automatically. Learn how this advanced threat works.
FDA approves first human trial for Paradromics' brain-computer interface that could restore speech for paralyzed patients through neural technology.
New phishing platform QRR targets Microsoft 365 users across 1,000 domains in 90 countries. Learn how to spot fake login pages and protect your accounts.
OpenTable now uses AI to track your dining habits and share insights with restaurants. Learn what data they collect and how to protect your privacy.
Google's discontinued Nest thermostats still secretly upload home data to company servers despite losing smart features, raising serious privacy concerns.
New Android malware NGate steals NFC payment codes in real-time, allowing criminals to withdraw cash from ATMs without your card. Learn protection tips.
DoorDash confirms data breach exposing customer names, emails, addresses after social engineering attack. Learn how to protect yourself from scams.
Concerned about Google's AI scanning your Gmail? Learn how to disable Gemini features that access your emails, Drive files and Chat messages for privacy.
Google warns Android users about dangerous fake VPN apps hiding malware that steals passwords, banking details and personal data from phones and tablets.
Apple's digital passport feature lets iPhone users breeze through TSA checkpoints this holiday season using Digital ID technology at 250+ airports.
A new phishing scam targets family photos with fake "Cloud Storage Full" alerts. Criminals steal credit card information through fake sites. Learn protection tips.

Value Investing: Selecting From The Bargain Bin

Picking a beaten-down stock requires a different kind of selection... Read More

Where Is The Rabbit?

We need a rabbit!This was a pretty horrible week for... Read More

The 1% Solution

You probably know the story of Sherlock Holmes and the... Read More

One Way Street

Ever turn down a street, get half way and suddenly... Read More

Mr. Market

I constantly hear the talking heads on CNBC-TV, the radio... Read More

Why the Majority Fail at Stock Investing

The gleam and bright lights of Wall Street lure in... Read More

9 Deadly Trading Mistakes!

The following are a list of nine things you want... Read More

Low Tide

When you stand on the ocean shore and watch the... Read More

Kick The Tires

Before you buy another car you walk around the lot,... Read More

A Personal Stock Market Investment Philosophy

∙ Make every investment in the stock market a long-term... Read More

Series 7 Exam

What is the Series 7 Exam? If you... Read More

Analysts - Do They Really Know The Stock Market?

When you become interested in a stock or mutual fund... Read More

The Stock Market Investor?s Worst Enemy

Every stock market investor faces one primal enemy. An enemy... Read More

Long-Term Investment In Todays Market?

The stock market is very unstable at this time going... Read More

The Great Stock Market Secret

When the stock market is going up and all your... Read More

Keep Your Profits

It looks like we have now entered a new bull... Read More

Lemmings Are Gathering

Before they go over the cliff to their destruction these... Read More

Buying Mutual Funds

It looks like the market is ready to start up... Read More

Stocks Options Trading

Let's assume that you want to make some serious money... Read More

Municipal Bonds

Because there are so many stocks that are NOT paying... Read More

Gurgle Gurgle

Caught in a whirlpool and being sucked under. No life... Read More

Is the Stock Market for You?

Many people would like to diversify their portfolios to expand... Read More

How Covered Calls Turned a Trader Around

Sidney felt sick as she looked at her latest OptionsXpress... Read More

Valuation

Every day I hear from the "experts" on CNBC-TV and... Read More

Market Globalization

Just 30 years ago the stock market was a shadow... Read More

maid service near Glenview ..