Will there be stock market carnage tomorrow?

Cantab.

With the instability in the Middle East getting a bit out of control, how hard do people think the markets will be hit tomorrow?

I'll be watching the Nikkei closely when it opens in about 2:30 hours time. I'd say there's a queue of brokers ready to convert. Is it time to ditch everything and pile into precious metals and defence stocks? (I know I am)

nikolaitr

Personally I'd say get out now from most stocks, the ISEQ has reached its peak. Its been increasing for too long and I believe it is over priced,Its just needs a readjustment. Its already been happening so far this year with a few 2 and 3 percent drops.

The oil problems will only add to this,I'd say give it 6 months until its good value on average. Just a hunch

dunkamania

perhaps a little premature?

D'Peoples Voice

dunkamania wrote:

perhaps a little premature?

I hope you're right!
I've been trying to make up my mind over the past 4 months on this issue,
but I still believe that the P/E of the Iseq and many other stock exchanges are neither overpriced not underpriced for this point in the business cycle.

Last time i looked the P/E of the Iseq was in the high teens, if Sherry Fitz are right about the rental yield in Ireland being 3%, then irish property has a P/E of 33, so I should be safe in stocks and shares that have a P/E of 19 or so.

irishguy

D'Peoples Voice wrote:

I hope you're right!
I've been trying to make up my mind over the past 4 months on this issue,
but I still believe that the P/E of the Iseq and many other stock exchanges are neither overpriced not underpriced for this point in the business cycle.

Last time i looked the P/E of the Iseq was in the high teens, if Sherry Fitz are right about the rental yield in Ireland being 3%, then irish property has a P/E of 33, so I should be safe in stocks and shares that have a P/E of 19 or so.

Sorry this may be a stupid question but what does P/E mean?

lomb

price to earning ratio, the number of years it will take for the profit to repay the cost of the share. i look more towards divdend per share. eps can be cooked easily. good history of dividend payment is money in the bank imho.
the banks are great shares to invest in in this regard. u get more in dividends on boi or aib shares than money in a current account , and the share price rises by inflation every year simply because financials track inflation indirectly through increasing loans/deposits.

damnyanks

stock market has been predicted by numerous economists to be over priced and to fall in price before year end.

lomb

D'Peoples Voice wrote:

P/E of 19 or so.

pricey imho, 12-15 is more like it for bona fide companies with track records like banks. high p/es are given to rapidly expanding tech companies where
people dont realise but the stock market is basically a crock of ****, cmany entities are created to defraud investors and pay out large management salarys list on the market, and then have to remain on the market as no one has offered to take them private. pension funds have to invest in them to track the market and so keep the price artifically high.
stick to companies that pension funds cant invest because of overexposure to sector/economy, conflict of interest etc etc.this leads to great p/e ratios, strong dividends and good capital growth. bank of ireland and allied irish spring to mind, great companies, great p/e, great track record, great dividend, stable business. boi has been in business since the 1700s!
if u guys think the above is crap, a relation of mine works in a huge semiconductor firm listed on the nasdaq and was paid options every year for the past 5 or 6 years amounting to approximately 3 million dollars a year with a salary of half a million a year. the boss was paid approx 10 -12 million a year in free shares or profit from shares. according to yahoo finance i have seen( all insider dealings must be reported and are public knowledge.) i know for a fact that the boss has made about 100 million dollars over the past 6 or 7 years and the relation about 15-18 million. how many shares does he own in the company now while hes still boss u might ask? both my relation and his boss own under a hundred grand each of shares in the company.
according to yahoo finance both sell the shares the day the options are due by the comapany to them.
of course under new accounting standards in silicone valley , options arent paid out to that extent any more but both retain very small holdings.
theres faith for u in the company( the pe was over 60 at one point and now is 22 or something, and they are still selling.
according to yahoo finance many pension funds and mutals (i counted six)are in for over 400 million dollars each in investment in the company(all large holdings must be reported), and not one major board member owns more than 100 grand of shares. :rolleyes:
Fund managers /most investors are basically brain dead, they look for sexy companies and pay too much.

warren buffet became one of the richest men in the world by sticking to proven companies bought when they were cheap, like he bought coca cola after the 87 stock market crash and within 2 years, his investment had grown by more than 3 growing berkshire hathaways value by double. buffett lambasts option payouts, management solely focus on eps (like enron where the books were cooked), tech companies, companies he doesnt understand what they do (like enron), anything unproven. he loves insurance where bets are taken and risk can be calculated and the odds are in his favour, loves stable companies that are cheap,and well run by great managers that arent dishonest (value investing)

anyone who invests in sexy shares with high p/e have the odds well against them imho.

D'Peoples Voice

lomb wrote:

pricey imho, 12-15 is more like it for bona fide companies with track records like banks. high p/es are given to rapidly expanding tech companies where
people dont realise but the stock market is basically a crock of ****, cmany entities are created to defraud investors and pay out large management salarys list on the market, and then have to remain on the market as no one has offered to take them private. pension funds have to invest in them to track the market and so keep the price artifically high.

don't get me wrong, I'm not saying that the P/E ratio is the only measure, obviously if you were investing directly yourself you might undertake an analysis of the cash flow statement, which is harder to manipulate than the Blance Sheet or P + L.
However my attitude is that if I'm getting a professional to diversify my investment, I wouldn't be investing my money with that professional if i thought that stock markets in general had P/E ratios above the early twenties.
I remember some famous Amercian investor being adamant that there is mean reversion in prices which ensure that over the long term a P/E of 8 times is reached. I hope he doesn't have the same attitude for all investment assets, because our property market is at 33 times. However it must be remembered that the P/E of property in California reached 29 times for a WHILE before it crashed so high P/E don't necessarily mean a crash is imminent, but merely a correction is needed! So I believe the stock market is safe for a while, especially given the lower dependency(as a % of GDP) that developed countries have on oil today compared to 1980s.