By Alex Salomon
1. Whether you invest for the long haul, for retirement or big plans or putting kids through college; or trade actively; and even maybe do both, one of the key factors in investing or trading is “stock valuation.” The debate pretty much always rages on between those who see stocks as undervalued versus those who argue that they are overvalued.
My personal “Eureka!” moment came earlier this week when I finally realized that many stocks I like and follow are currently extremely cheap on business metrics that matter!!
I have a hard time admitting it took me that long to formulate the idea, especially when I have researched and read about it several times, over several months, from traders and financial commentators I follow and respect. So I sheepishly admit that I had not yet realized that many stocks are historically trading at very low ratios on key business metrics: cash on hand, cash flow generation, cash to growth, healthy ADSO (especially considering the debt and financing crisis going on since 2008), and cash relative to sales.
I am not talking about the entire universe of stocks: I am saying most of the individual companies I look at are sporting healthy growth even in the face of depressed global news, and their cash and business metrics are actually cheap. So what gives? But as many have also pointed out, I understand that they can remain cheap for some time to come!
2. With the news that the European Parliament was trying to outlaw Credit & Rating Agencies, I am surprised we have not seen as much backlash, posturing, amnd campaigning to have the rating agencies destroyed and outlawed. Considering the rise in EU populist parties, considering our own politicians taking populist stances (illustrated just over the last two weeks by JP Morgan’s Dimon grilling in the US Senate), I am just surprised we’ve not seen more populism against the “evil” agencies.
I had thought and hypothesized the “evil agencies” would be banned a lot earlier, maybe back in 2010, 2011 — or at the very least, battled, demonized and used for all sorts of political gimmicks.
So what gives? Well, surprise, surprise: Europe is late on that topic. Late, late, late, from everything that matters to matters that don’t.
You know what is going to be very — VERY!! — bullish? If and when Europe is actually early and proactive!
3. Totally unrelated, but I am quite sure Twitter management and top brass reads this article and our news site (how could they not?!!!) and they are going to steal my next great social network idea (insert: sarcasm): when will companies be able to use a scaled down Twitter engine / API for intranet to replace instant chats? And to share important emails? When can I expect Twitter to be incorporated in my company email to retweet important emails and announcements?
This thought is not lengthy but it has meat: just like Google has incorporated its search engines to private sites and even computers, Twitter is likely to become more prevalent and incorporated in news list, email systems and corporate clients.
So what gives? I am still puzzled Twitter has not been acquired by another large corporation! Facebook, Apple, Google, Microsoft top brass, are you reading this article?
4. Even more unrelated, as we wade through the European Soccer Championship and gear up for the 2012 Summer Olympics, I deeply think that using sports as a proxy for issues and geopolitics is idiotic — however, it can also generate extremely entertaining jokes and fun interactions. People taking sports for a true proxy should not. People making fun of that proxy can be very entertaining.
My tipping point on the idiocy came from a deep, thoughtful, extremely precise trader specializing in complex CDS underwriting but then losing it completely by advocating that the Greek football team winning over Germany would be good for Greeks (how? By cutting their deficit? By reducing their debt? By fighting corruption? By convincing large foreign companies to invest in Greece?). I did ask him whether Tiger Woods losing the US Open was negative for the mood of Florida, but that did not get me a new friend!
So what gives? I just wish (well, I am a dreamer after all) that a few courageous European leaders would have announced that their selected athletes for the 2012 Olympics would be sent to London as a European delegation, not as a national one. That would be an unbelievable, audacious, revolutionary political message carried through sports! (And I am quite certain many will find that very concept idiotic).
5. If you read this column every week (thank you so much), then you know I have to rant about what I call our “ongoing crisis of accountability and honesty.” We are living through a period of crisis created by uncontrollable debt. More and more, I am thinking that the debt is only the symptom: the disease is a crisis of accountability and honesty. My rant of the week is really summed up by a tweet from @JeffMacke on June 21:
$GS [Goldman Sachs] goes short exactly 3-mos after the “once in a generation buying opp” call. If they weren’t soulless vultures that would be embarrassing
So what gives? Jeff Macke stole my thunder, I was going to write more than 140 characters but he summed it best. The same soulless vultures who helped Greece fudge their accounting to cheat in their Euro application and got Greece in when they shouldn’t have…
No positions in any mentioned securities.
Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of his employer or any other person or entity.