Dow’s Price-to-Earnings Ratio Is Now Nil
Aug 26th, 2008 | By Doug Casey | Category: Stock Market InvestingIn Q2 2008 - for the first time ever - the Dow Jones Industrial Average posted quarterly losses instead of earnings. The Dow’s price-to-earnings ratio is now listed as “Nil,” leaving Wall Street without its favorite valuation metric for blue chip companies, says Casey Research’s Doug Casey.
Citigroup (NYSE:C) and JP Morgan (NYSE:JPM) were pummeled for their subprime investments, but the contagion of the credit crisis affected every balance sheet within The Dow. A couple standouts amongst the wreckage were AT&T (NYSE:T) and Verizon (NYSE:VZ), whose net incomes of $4B and $2B, respectively, were offset by huge losses in “Investing Activities.” AT&T reported a loss of $11.3B, and Verizon lost $17.5B.
These investment write-downs send huge amounts of capital to “money heaven,” tempting some that have pitched a tent in the inflationist camp to wonder if we might be in for a major bout of deflation. But as Doug Casey so compellingly points out, today’s fractional reserve banking system forces the government to pursue an aggressive inflationary agenda. They must continue to push more and more money into the system to maintain the appearance of economic growth, and cover up the losses of these blundering blue chips.
Source: N’il-flation Strikes the Dow - Earnings Plummet Into the Red
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Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.