Wednesday, October 22, 2008

I am (partly) changing my mind about the stock market

I think we will see corporate earnings continue to grow. Even so, that does not mean that nonfinancial stock prices will bounce back to last year's levels; price-earnings ratios will not return to their previous levels. I will explain further in my forthcoming working paper "Market Responses to the Panic of 2008" -- using supply and demand, of course!

3 comments:

Don said...

Since you wanted more banks, how do you feel about this story:

How about this, from the NY Times:

http://dealbook.blogs.nytimes.com/2008/10/21/gmacs-hope-lies-in-future-as-a-bank-hedge-fund-says/#comment-382536

"Only a week after the government announced $250 billion in capital for banks, some investors are getting creative in their suggestions on who should qualify.

David Bullock, managing director of Advent Capital Management, wrote a letter to the chief financial officer of GMAC on Tuesday, suggesting that the former General Motors financing arm turn itself into a bank holding company so that it can grab some of the cash.
In Europe, Mr. Bullock pointed out, parts of the auto industry are benefiting from bank rescue.plans. So why not in the United States?."

I'm not making this up. Here's my comment:

“Only a week after the government announced $250 billion in capital for banks, some investors are getting creative in their suggestions on who should qualify.

David Bullock, a hedge fund manager in New York, wrote a letter to the chief financial officer of GMAC on Tuesday, suggesting that the former General Motors financing arm turn itself into a bank holding company so that it can grab some of the cash.”

Come on ! How onerous can the terms of TARP be that people who don’t need it are starting to line up to receive it? What more proof do we need that the government negotiated a terrible deal for the taxpayer?

The next thing we know, Google and Apple will be turning themselves into banks. Can I have myself declared to be a bank?
— Posted by Don the libertarian Democrat

Are you interested in forming one with me?

Sheng said...

Casey, I suppose you have multiple papers coming up based on the ideas you disclose in this blog...

Abby said...

Hi! I'm an editor for Seeking Alpha. Please contact me at your earliest convenience at acarmel@seekingalpha.com. Abby