“What you’re now seeing is profit and earning ratios are
starting to get to the point where buying stocks is a potentially
good deal, if you’ve got a long-term perspective on it,” Obama
said at the White House today while meeting with British Prime
Minister Gordon Brown on battling the global recession.
Now, if you don’t get what’s wrong with the above statement, don’t feel too bad, as financial illiteracy is pretty widespread these days.
I don’t have link handy, but part of the argument is that P/E ratios for the S&P 500 have just reached 30% below historic averages, while the period from 1996-2006 looks like an anomaly.
If I could choose just one area of expertise that I would want my POTUS to have mastery of, it would be finance or economics; P/E ratio is pretty fundamental in those areas. I never thought that Obama knew much about that. I’ve always thought that he just spoke well.
I don’t have link handy, but part of the argument is that P/E ratios for the S&P 500 have just reached 30% below historic averages, while the period from 1996-2006 looks like an anomaly.
But if earnings go down P/E goes up. P/E has been coming down, which means price has been coming down faster than earnings, meaning Obama is right, now would be a time to buy. Or am I missing something?
In my view, the big problem is that there so much uncertainty about future earnings. How much of those future earnings is Obama going to take in taxes, regulation, and carbon trading. But that is another issue.
And I’m not going to say anything about “profit and earnings ratios.” Did he misspeak? Was he impercise? He reference ratios (plural), so he’s close enough. Everybody knows what he was saying.
**That fact that he doesn’t even know what a PE ratio is doesn’t surprise me a bit–what socialist would. **
Bush had an MBA from Yale and is the first President to have an MBA. I suspect if Bush was asked the same question during a press conference, he would have stumbled.
Bush: "Ahh, PE ratio? Well, now that is ahh, that is the ratio of price to earnings (damn, I’m smart). Which means that, (let me do the math here.) The PE ratio of my term comes to…
If you are one of those people who invest based on what the President says, you deserve to lose your money.
What I don’t understand is all these people criticizing Obama on the economy when only a few months ago, we had Bush and McCain say how strong the fundamentals of the economy are and that there was nothing to worry about.
It’s odd but I don’t remember so many threads on the incompetence of Bush in regard to the economy then but maybe it’s because we were used to him.
Bush had an MBA from Yale and is the first President to have an MBA. I suspect if Bush was asked the same question during a press conference, he would have stumbled.
Bush: "Ahh, PE ratio?
Who cares what the PE ratio is when the economy is fundamentally sound?
Odd that none of the Conservatives spoke up when he said that.
“If you are one of those people who invest based on what the President says, you deserve to lose your money.”
I take exception to that. A few years ago I jumped aboard the ethanol train after one of Bush’s SOTU speeches thinking that if I got on board early enough i could ride the wave. Of course, I was smart enough to sell at a significant gain when it was clear that the stocks had become overpriced and were merely floating on hype with little to no actual substance.