Stock Market: Valuations
Valuations
In the short run, stock markets can perform better than the economies they represent and the companies that make them up. In the long run, it’s impossible. A period of unusually high returns must be followed by more normal returns
When to buy?
- Buy when: (long term growth + dividend yield) > 1.5 x (P/E ratio)
Stock Prices
- Quick Links
| Name | NYSE | |
|---|---|---|
| American Express Co. | AXP.N | AXP |
| Bank of America Corp. | BAC.N | BAC |
| BB&T Corp. | BBT.N | BBT |
| Bank of New York Mellon Corp. | BK.N | BK |
| Berkshire Hathaway Inc. | BRK.B.N | BRK.B |
| Brookfield Assent Management Inc. | BAM.N | BAM |
| Citigroup Inc. | C.N | C |
| Comerica Inc. | CMA.N | CMA |
| Capital One Financial Corp. | COF.N | COF |
| Fifth Third Bancorp | FITB.O | FITB |
| Keycorp | KEY.N | KEY |
| Merrill Lynch & Co., Inc. | MER.N | MER |
| M&T Bank Corp. | MTB.N | MTB |
| National City Corp. | NCC.N | NCC |
| Suntrust Banks Inc. | STI.N | STI |
| US Bancorp | USB.N | USB |
| Wachovia Corp. | WB.N | WB |
| Wells Fargo & Co. | WFC.N | WFC |
| Washington Mutual Inc. | WM.N | WM |
Monetary Policy
- The US Fed is reflating the economy so to speak — injecting sufficient monetary liquidity to keep the economy growing at the risk of price stability. This has been the Fed’s approach since the tech stock market meltdown eight years ago and it has resulted in one bubble after another since then. First it was tech stocks, then real estate and most recently commodities. And sure enough, the current aggressive easing by the Fed will eventually result in another financial market bubble due to the availability of easy money and low market risk premiums. The trick as an investor is to identify where the excess liquidity is going to hit next and buy ahead of the crowd. US corporations are in great shape financially and US equities have significantly lagged stock markets elsewhere over the past five years, so US stocks might be the next benefactor of the Fed. As the old saying in the stock market goes, “don’t fight the Fed”. If the Fed is lowering interest rates you want to be getting long stocks (Paul Lennox, World Market Update, January 25, 2008)
