• Home
• About Us
• Contact Us

Massive Multiple Compression Following Bailout?

Posted on October 3, 2008

I was pleased to find the following article on RGE Monitor which highlights, as I’ve been posting from some time now, the massive financial fraud currently being perpetrated in the US. It would seem that the $700 billion bailout is the final crescendo of this fraud.

But back to the topic of stocks:
I’ve refrained from writing about individual stocks during this crisis, since it’s difficult to figure out how to invest in this environment simply because such blatant and obvious fraud on the macro level, cannot but significantly undermines one’s confidence in the financial system as a whole.

Seemingly, stock multiples need to contract significantly from here, in order to compensate investors for the added risk of investing in this new financial environment, where assets are seized without regard for shareholders, $100 of billions of dollars is transfered without legal authority etc.

Will we return to 1973-1974 multiples of 5X-7X earnings for the average stock? It’s quite conceivable. If that’s the case, I’d stay away from stocks for quite some time. Time will tell.

Here is the link to article mentioned above: http://www.rgemonitor.com/financemarkets-monitor/253850/financial_eugenics__the_paulson_plan_for_survivor_bias

Some excerpts:

“Clearly what is going on here has nothing to do with kick starting the credit markets or stabilising the equity markets or restoring depositor confidence in banks…What is going on here is a blatant attempt to provide government funds to a select cadre of firms (not all banks) which are chosen to be the survivors feasting off the carcasses of their less fortunate and less well-connected brethren as the downturn intensifies in the years to come…This bill is about engineering survivor bias to friends of the Bush administration so that they profit disproportionately from the collapse of these markets using the funds provided by the taxpayer via the unreviewable and unconditional authority of the Secretary of the Treasury…
The basic plan is to set up a federal money laundering operation.”

RSS Feeds:

Disclaimer:
This site may include market analysis and we may own shares in the stocks mentioned in our reports. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.

Comments