I am so sick of hearing that stocks are up 40%. Are you kidding ME?!!! This market tanked and its time for it to REALLY bounce, in view of the big scheme of things. I understand that BAC is up 40%+ from its lows, but this hogwash about a correction due to a 40% run up is absurd. Most of the stocks have NOT gone up 40% and many of them haven't evne gone up 5%. Look at JNJ for example. Look at HRS. These are just two examples of how stocks haven't necessarily reached +40% levels. WHAT run up? Overall, that hasn't been one. I can recall when JNJ was at 72 last summer, and when BAC was at 30. A run up?!!!! HARDLY! If we are due for a correction, we are due a HUGE BREAKOUT!!
Looking at the Dow's 14,093 peak on Oct. 12, 2007, the per-share market value of Bank of America, Merrill Lynch and Countrywide stood at $53, $23 and $18, respectively, or a cumulative price of $94. Today, the combined companies trade at around $13. Bank of America is unlikely to hit $94 soon. But $13 is equivalent to 14% of its previous market value. That's a heady discount.
BAC was in the 50's back in the day so even though we've soared from 2.53 back in March we are well off of our highs from years past plus now we have Merrill and Countrywide in the mix. I'd be shocked if this never goes to 20's and 30's again over the coming years.
I know all about P/E ratios (which really mean nothing), quick and current ratios.... etc. etc.
Whether you have noticed or not, this market is based upon emotion and that's it. Psychology drives these markets just as it did today. People sold into the irrelevant Consumer Confidence number because they believed it had a much stronger impact on our economy than the Chicago PMI (which, by the way, wasn't even mentioned by CNBC and is a true indicator of the ism index). This entire market revolves solely around emotion- it has for the past year. If you choose to pay attention to P/E ratios in a market like this, be my guest. You'll lose.
I keep hearing pullback, pullback, pullback coming but I think the reason the market is going higher is sidelines money keeps pouring in on every dip. Lots of investors including big $ missed the ride since March and have to get back in or are dying too!
The US dollar is likely to test lows of 2008 shortly, which will help prevent any nearterm drop of stocks to any serious extent. The more likely scenario is a short squeeze into August to 2009 highs.