The Market Ticker
Commentary on The Capital Markets- Category [Market Musings]

Bloomberg raises an interesting point I've raised a few times over the last number of years:

If you sold every share of every company in the U.S. and used the money to buy up all the factories, machines and inventory, you’d have some cash left over. That, in a nutshell, is the math behind a bear case on equities that says prices have outrun reality.

Now notice what the criticism is:

“The issue we have with Tobin Q is that it does a very poor job at timing the market,” Rubin said from Westport, Connecticut. “The followers of Tobin Q never told us to buy in 2009, yet now we are warned that we should sell. Our response is sell what? We were never told to buy.”

So what?  A market that is non-functional -- that has been distorted -- is only "buyable" if you are gambling, and there is no means to evaluate such a market rationally because it is a game of chance.  

If you get paid some price per share (e.g. you're a broker) you don't care if your clients win or lose; you just want volume.  But if you are someone who actually wants to invest instead of gamble then such a market is not investable on the whole, irrespective of retrospective results, because while hindsight is 20/20 it is useless in predictive value since none of us have a Tardis!

So yes, you were out.  But then again you were out in 2008 too, so exactly what have you lost?

I'll tell you what you've gained: A lot of restful nights' sleep.

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America Online still exists? smiley

This "combination" is utterly amusing.  The idea that now the market will "consolidate" ad platforms and this somehow will "add value is amusing beyond words.  So is the premise of "monetizing" mobile platforms in particular, and the premise of playing the "direct delivery, individualized content" game.

Come talk with me about this when firms like Netflix pay for all of their own transport instead of forcing their operating costs on other people, including through government agitation -- costs that are large enough to render their business model uneconomic were they not to engage in their current tactics.

I'll be waiting a long time for that.... but in a bubble world where only "making the deal" counts, whether it makes sense or not, well, you get announcements like this.

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Liquidity?  What's that?

The bond market is moving on lots that are a tenth of what they used to be but the magnitude of the shifts are the same.  The Fed has basically bought up enough of the market for Treasuries to turn that market illiquid!

That is very, very bad folks.  While it doesn't necessarily mean there will be a dislocation if there is one it will be very ugly.

Like 2008 ugly.

Except for one small problem -- the Treasury market is a lot bigger in notional value, which means the "ugly" has the potential to be much worse.

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Rotation into an ever-narrowing group of stocks, particularly when estimates are coming down (instead of going up) and those into which traders are rotating are high-flying ridiculous-PE (or negative PE) issues is a fairly-reliable marker of waning confidence -- despite the screeching coming from the media.

Macro indicators have been deteriorating for quite some time; asset prices have been driven higher by "cheap money" at the expense of actual consumers who have to make the final purchases.

How far are we from the proverbial wakes in a cold sweat moment?  I have no idea, but the conditions are ripe for it right here, right now, and when (not if) it occurs I will be hoisting the old "told 'ya so" flag once again.

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It never ceases to amaze me how people will try to justify this sort of crap.

No dividend, 32 P/E, a bit more-reasonable 2.2x sales.  But that operating margin, with a 32 P/E, screams bubble!

And then they get hit for ~$20/share, which takes you back to roughly November's share price and in the general neighborhood of where it traded last summer before a previous $20/share swoon.

Naw, it's not a bubble market...... sure..... (CMG-cough-cough!)

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