Reading the world melts, we can hear a lot of phrases in the coming months. It describes the idea that the U.S. stock market, although it seems very expensive traditional scale, currently could before the inevitable collapse occurred, finally a euphoric cheers.
There are two reasons why “melting” theory may not be as eccentric as it sounds. First, it comes from investor Jeremy Grantham, who has gained a reputation for knowing how to read a financial bubble. He dodged the dotcom bubble of the late 20th century and the froth of the us housing market in 2007-09 – two of the best calls made in the past 20 years.
Grantham’s default Settings, as you might expect, tend to be bearish, or at least cautious. If he’s talking about melting, it’s newsworthy. In addition, his Boston fund management group, GMO, manages $75 billion in assets – he is a player.
The second reason is that grantham is not, of course, cheap. “What we can be sure of is that we have learned from the stock market analysis that the current price is very high,” he said. Instead, his thinking is driven by “a mix of statistical and psychological factors based on past eras”.
On the statistics side, he noted that the global economy is in sync, with high margins, and that President trump’s tax cuts could make them more obese, “perhaps providing a feat of keeping prices up”. So the current strength of the stock market is quite broad. In past bubbles, earnings have been almost concentrated in fewer and fewer “winners”. This time people like apple are growling, but the same disagreements haven’t happened yet.
Grantham, who has seen media coverage, has shown a glut of evidence of “oversensitivity”. American newspapers and TV stations have become increasingly interested in financial markets (bitcoin is “the real, crazy mini-bubble”), but it hasn’t been crazy about the Internet age. “Watch TV shows for lunch,” he said.
Grantham’s guess is that over the next six months to two years, there will be more than 50 percent of the opportunities for financing or the end of the bubble. If that happens, there is a 90 per cent chance of financing, which means the share price could fall by half from its peak.
A credible theory? So, yes, anything is possible. A year ago, when the dow Jones industrial average was above 20, 000, few thought it would reach 25, 000 in 12 months – but it happened on Thursday. Is this a state of euphoria, or is it just an early sign? Given that it is impossible to know, grantham’s suggestion that “cheer up” sounds reasonable. Brace and keep a clear eye exit.
The news of Debenhams’ Christmas was not as happy as the chief predicted
Eight months ago, Debenhams CEO Sergio Bucher told investors that he would make the seemingly exhausted department store group a “digital, different destination”. He does not reject the discount altogether, but this strategy will be less deployed and more affected.
Good idea, ashamed of the result. Even before the three-year plan was completed, Debenhams had put forward a dire profit warning that would harm shareholders even if no one said it. The full-year profit will be 5,500-55 million pounds. That’s a third of last year’s 95 million pounds.
Debenhams’ Christmas sounds familiar. The report has long expectations of “highly competitive” and “driven” markets, especially “gifts”, which are all shorthand for alcohol to Christmas cookies. This will not cut the ice with investors. Cheap booths like B&M don’t go away.
Of course, we can’t judge a three-year recovery plan at a bad Christmas. But, again, you can’t blame investors for this pessimistic view – shares have tumbled 15 per cent and debenham is worth only 370 million. Five years ago, the company’s pre-tax profit was 139 million pounds, and the decline was consistent.
As has been said, lower lending by private-equity firms bad time in the past, but the current medium-term financial leverage target is reducing net debt first line operating profit of 0.5 times. The new earnings forecast could mean that 1.3 times last year has not made any headway. That is why a dividend of 42 million pounds a year looks unsustainable – as is theoretical (or imagined) 11% dividend yield.
Buch is from amazon, where they don’t have to worry about excess storage space, long-term leases or even shareholders’ dividend expectations. Good luck – this job looks even harder.