jbenko_IHB
New member
[quote author="Failedagent" date=1228465395]I think the market will bottom when price/dividend ratios start to make sense, not when price/earning ratios look good. I for one have given up on phantom earnings from the BS that public corporations put out as an income statement. My new motto is "send me the money" not "show me the money".</blockquote>
P/E ratios indeed are a horrid way to look at equities. As they are derived from past earnings. Now in a stable economy you can get a general idea as to how expensive or cheap the stock is trading at. But in this environment when future earnings can all of a sudden be down 50%, it will in theory double your P/E ratio making it expensive again. That is why its better to look at PEG ratios as they incorporate future earnings growth (assuming they have it correct), but in this market even that is risky. For a great example punch in ticker DRYS and see how low their P/E is at. However now they are charging 1,000 a day to ship vs. 200,000 when demand was high. It looks dirty cheap, but it will even look cheaper when it trades at 1 dollar.
Dividend to price ratio? Not sure thats any good either. Many firms have already slashed dividends and as capital gets more scarce they will continue to do so.
I mean go take a look at Frontline Limited (a shipping company, FRO is the ticker). The stock is around 26 with a 7.75 annual pay payout which yields 29%. Do you think they will continue to pay it out? What about Bank of America? Is their dividend safe?
I wouldn't buy investments based on dividend rates unless you know for a fact they won't cut it. Because if you buy something, and dividend gets yanked the stock will collapse the amount that it got yanked. So in FRO's example, a zero dividend will cause a 29% drop and some as it signals an obvious weakness.
There are many ways to play this market and succeed. To be honest this year has been one of my best years ever due to volatility and numerous ways to make fast cash. However, its a market where you can lose your pants and your wife if you're not careful either. So you have to be armed to the teeth with information, patience, instict, common sense, anticipation, discipline, focus, sounds strategy, etc. If you don't have that, just wait till the economy is better or pay someone to do it for you.
P/E ratios indeed are a horrid way to look at equities. As they are derived from past earnings. Now in a stable economy you can get a general idea as to how expensive or cheap the stock is trading at. But in this environment when future earnings can all of a sudden be down 50%, it will in theory double your P/E ratio making it expensive again. That is why its better to look at PEG ratios as they incorporate future earnings growth (assuming they have it correct), but in this market even that is risky. For a great example punch in ticker DRYS and see how low their P/E is at. However now they are charging 1,000 a day to ship vs. 200,000 when demand was high. It looks dirty cheap, but it will even look cheaper when it trades at 1 dollar.
Dividend to price ratio? Not sure thats any good either. Many firms have already slashed dividends and as capital gets more scarce they will continue to do so.
I mean go take a look at Frontline Limited (a shipping company, FRO is the ticker). The stock is around 26 with a 7.75 annual pay payout which yields 29%. Do you think they will continue to pay it out? What about Bank of America? Is their dividend safe?
I wouldn't buy investments based on dividend rates unless you know for a fact they won't cut it. Because if you buy something, and dividend gets yanked the stock will collapse the amount that it got yanked. So in FRO's example, a zero dividend will cause a 29% drop and some as it signals an obvious weakness.
There are many ways to play this market and succeed. To be honest this year has been one of my best years ever due to volatility and numerous ways to make fast cash. However, its a market where you can lose your pants and your wife if you're not careful either. So you have to be armed to the teeth with information, patience, instict, common sense, anticipation, discipline, focus, sounds strategy, etc. If you don't have that, just wait till the economy is better or pay someone to do it for you.