Junior Mogambo Ranger (JMR) Rick K thinks that I am being too critical of the
Dow Jones Industrials when I snort in derision at that index sporting the
unheard-of price-to-earnings ratio of 87, as "almost all of the insanity comes
from just one company: General Motors (NYSE:GM)".
He explains that "GM lost US$74.29 per share over the last year (on a stock
priced at only about $17 per share), compared with earnings for the rest of the
Dow of $92.37 per share. So GM alone lost 80% of what the rest of the Dow
companies made over last year! If GM's loss was excluded from the Dow's
earnings, its P/E would be around 16 rather than over 80."
Naturally, I figure that, as the old saying goes, "What's good for GM is good
for the country," and so it reflects what is actually going on in the country.
And besides, it really makes no
difference anymore, anyway, since accounting itself has gone to "the dark side
of the Force", like everything else.
And to show you what I mean, Bloomberg.com reports that regulatory filings show
that "Banks and securities firms, reeling from record losses resulting from the
collapse of the mortgage securities market, are failing to acknowledge in their
income statements at least $35 billion of additional writedowns included in
their balance sheets".
And so everything is lies, lies, lies! Hahaha! We're freaking doomed!
This saved me from having to mention that the other indexes are just as weird,
as the historical average for a price-to-earnings ratio is 14, with a P/E of 20
being near the extreme of "overvaluation", and while currently the P/E of the
DJ Industrials is 86, the DJ Transportation Index has a P/E of 24, the DJ
Utility has a P/E of 16, the S&P500 has a P/E of 23, and the S&P
Industrial Index has one at 22! Hahahaha! Apparently meaningless, as the prices
of these stocks are actually rising! Hahahaha!
And the reason is that nobody is buying, because nobody has any money! I say
this as a way of introducing this week's episode of "What is wrong with this
picture?" The scene opens with the Commerce Department reporting that consumer
spending rose 0.2% in April, which is down from the 0.4% increase in March.
The more stupid of us are busily trying to multiply this 0.2% increase for
April by 12 months (to get an annual figure), and screwing it all up pretty
badly, and we keep re-entering the data over and over and making stupid
mistakes until we are so frustrated that we are jamming the calculator's keys
with murderous force, and our fingers hurt.
Coincidentally, the Commerce Department also said that incomes grew 0.2%, which
even included the $134 billion in the government's tax rebates that are only
half sent out! Hahaha!
If you are like me, you are suddenly realizing that your income did not go up
by 0.2%, or any percent, because if it did, it seems like you would have
remembered it. And anyway, if my income DID go up, then where in the hell is
all of this money?
In fact (and I think I speak for everyone), we're slaving away at our stupid
jobs like the caged, workaholic rats we are, and all we ever get is an
ungrateful boss, an ungrateful spouse and ungrateful children whining, whining,
whining that you don't give them enough money, and how I "owe" them money just
because they were born and how they didn't "ask to be born", even though I sure
as hell did not ask them to be born, and pretty soon we are yelling about who
is responsible for their being born at all, but everyone knows it's about the
money.
In fact, everything is about the money these days. Mostly the lack of it. But
mostly, mostly because of businesses and governments lying about it. Ugh.
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2008, The Daily Reckoning.)
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