Predicting the future is always difficult, but short-term pictures are a lot clearer than the long-term. There's plenty of data out right now to justify a return to bearishness, starting with large-scale dilutions of common equity:
Please note that issuance of new shares does not increase the value of retained earnings' contribution to shareholders' equity, which is the most important contribution to a company's intrinsic value over time (if you're a value investor, like me). The end of the article hints that increased selling by insiders is coinciding with the rise in secondary equity offerings. Looks to me like the smart money is heading for the last exit they'll see for a while.
Furthermore, Robert Shiller thinks your home equity ATM will be even less useful next year than it is now:
I don't think I need to re-hash here how lower home equity prices will push down consumer spending by making people feel poorer. Just remember how I'm harnessing these inexorable forces to try to make some money in a long bear market. Only time will tell whether this is worth my effort.
Nota bene: Anthony J. Alfidi is short uncovered calls on SPY and IWM.
American common equity is increasing for the first time in five years, threatening to dilute corporate profits as companies sell a record amount of stock and cut dividends the most since 1938.
Wells Fargo & Co., ProLogis and more than 150 other companies raised $82.2 billion this quarter, beating the record pace at the height of the technology bubble in 2000, according to data compiled by Bloomberg. The combination of adding shares and restricting dividends will reduce annual equity returns as much as 4.1 percent, the data show.
Please note that issuance of new shares does not increase the value of retained earnings' contribution to shareholders' equity, which is the most important contribution to a company's intrinsic value over time (if you're a value investor, like me). The end of the article hints that increased selling by insiders is coinciding with the rise in secondary equity offerings. Looks to me like the smart money is heading for the last exit they'll see for a while.
Furthermore, Robert Shiller thinks your home equity ATM will be even less useful next year than it is now:
Shiller, co-founder of a home-price index that bears his name, said prices may “continue to fall, or stagnate” in 2010 and 2011. The S&P/Case Shiller index of 20 major cities showed median home prices were down 32 percent in March from their peak in July 2006.
I don't think I need to re-hash here how lower home equity prices will push down consumer spending by making people feel poorer. Just remember how I'm harnessing these inexorable forces to try to make some money in a long bear market. Only time will tell whether this is worth my effort.
Nota bene: Anthony J. Alfidi is short uncovered calls on SPY and IWM.
