Imminent and severe market correction

[porkpie324]

Talking of economists and their predictions, try reading Chuck Butlers daily column on 'Kitco', he predicted the jobless rate and the payroll data. porkpie

 

[dhukka]

Dhukka, I think you are being too nice here...... Very expensive????

It's an outrages price for a Company that has rapidly contracting earnings. MSFT is paying some 61 times earnings for an entity that has reducing earnings and a business model that is losing more every day to Google..... I don't care what kind of synergies the deal makers spin up, it's just the dumbest thing I have seen MSFT do, certainly under Gates' guard the Company wouldn't have ventured into such a joust...

Put it to you this way, I am an investor and I can buy Google at 40x earnings, where there EPS growth is 50%+, or I can buy YHOO where earnings (now) are at 61x earnings at -20% growth..... Ummm.... even a teenager can do the math....

But don't worry everyone, clearly this signals that the market is now cheap, we should all wade in with the cash that we have cause it's all going to be ok, M&A is back on the agenda...... Hold on a second, what where the payroll numbers again?????

What I love is that now that the employment numbers are anemic, the pundits are saying "how can you trust them, they are always revised.. it will probably be revised up....". However, the same pundits when the NFP was good were saying " don't worry, the economy is ok".... HAHAHAHA.... gotta love it.

Cheers

Spot on Reece it is outrageous. These are the kinds of prices that people paid back in the dotcom boom and subsequently had to write them down when reality set in. We were even doing it Australia. Remember when Computershare over-payed for E-trade Australia and then had to write huge chunks of it off?

As for the employment numbers. The pundits to a certain degree have been vindicated thus far with upwardly revised numbers. That is if you exclude the 378,000 or almost 30% of jobs the B/D adjustment revised away last year.

I suspect in the next few months the pundits will be unable to use the upward revision cop-out as the numbers get revised down.

 

[Bushman]

That means Microsoft's offer is priced at an EBITDA multiple of more than 30x. Anyone with any experience in M&A deals will tell you that is very expensive.

.

True - EBITDA multiple of 30x recurring profit is expensive under normal circumstances. But the internet is growing every day and a search engine, as the name suggests, is pivotal to earning income from the internet. How do you value that? I do not have experience in buying tech companies so I could not tell you what it would cost to build one of these from the ground up.

The 'myth of decoupling'? What a funny term. For it to be a myth, you would have to be denying that India and China are modernising.

Anyway I was not having a go. It is simply annoying when the chorus simply rings out 'it is overpriced'. I do not watch American cable so I did not realise it was met with euphoria on CNBC. It definitely does not mean that Wall St is blowing bubbles again if that is why they are excited.

 

[Whiskers]

The 'myth of decoupling'? What a funny term. For it to be a myth, you would have to be denying that India and China are modernising.

I'm inclined to think decoupling is progressing steadily.

I heard on a news broadcast a few days ago that China and India accounted for about 1/4 of world GDP about five years ago while USA accounted for 1/3. Now the numbers are reversed with the USA accounting for about 1/4 and China and India 1/3.

I have postulated earlier about the exaggeration of the impact of a x% downturn in the US having a similar or worse impact on China in particular... it won't happen.

 

[wayneL]

I'm inclined to think decoupling is progressing steadily.

I heard on a news broadcast a few days ago that China and India accounted for about 1/4 of world GDP about five years ago while USA accounted for 1/3. Now the numbers are reversed with the USA accounting for about 1/4 and China and India 1/3.

I have postulated earlier about the exaggeration of the impact of a x% downturn in the US having a similar or worse impact on China in particular... it won't happen.

China & India a third of world GDP? I seriously doubt that.

 

[ithatheekret]

Don't believe the spin , China is geared up and still positioning itself .

Whilst every spinner is concentrating on the US equation in the China theory , the true aim is India . Shipping easier , quicker and a massive population to support their goods . Japan is only afloat due to China , if China sinks , Japan is stuffed . So is the surplus they have .........

 

[Whiskers]

So whilst the market gets carried away with over-priced aquisitions of internet search engines the US economy continues to deteriorate:

It's recession time.

What! I'm starting to worry that some of you are suffering from a bit of hypochondria... not happy unless it's all bad news.

It's an outrages price for a Company that has rapidly contracting earnings. MSFT is paying some 61 times earnings for an entity that has reducing earnings and a business model that is losing more every day to Google..... I don't care what kind of synergies the deal makers spin up, it's just the dumbest thing I have seen MSFT do, certainly under Gates' guard the Company wouldn't have ventured into such a joust...

Isn't Gates still a major shareholder and chairman of the board!?

I fail to see how this offer could have proceeded without Gates' approval.

Apart from Gates as chairman the board includes Reed Hastings, founder, chairman and CEO of Netflix Inc. and Charles H. Noski, former vice chairman of AT&T Corporation.

When you consider the genius of Gates and a bit of Hastings and Norski expertise, I give them a bit of credibility for having a viable plan up there sleves and knowing what they are doing.

 

[dhukka]

True - EBITDA multiple of 30x recurring profit is expensive under normal circumstances.

It's not expensive, it's ridiculously expensive.

But the internet is growing every day and a search engine, as the name suggests, is pivotal to earning income from the internet. How do you value that?

Exactly the same way you would value any business. Why would you value an internet business in a different way?

I do not have experience in buying tech companies so I could not tell you what it would cost to build one of these from the ground up.

Neither could I, but I can tell you how much it takes to buy one. US $44.6 billion. Ridiculously high.

The 'myth of decoupling'? What a funny term. For it to be a myth, you would have to be denying that India and China are modernising.

No you wouldn't. You would just have to be aware that if the largest economy in the world slows significantly, the rest of the world will be affected. Simple.

 

[Whiskers]

China & India a third of world GDP? I seriously doubt that.

I'm still trying to recall which news bulletin it came from so I can get more detail. I watch some of the yank and German broadcasts too and it was only a few days ago.

Just did a google and came up with this from Treasures Costello from Dec 06, (Not sure how old the data is) which tends to support the notion. I know 2030 is a long way off, but China and India probably exceded all expectations in the last couple of years.

By 2030, Asia’s share of world GDP is projected to reach around 45 per cent, compared with its share of global population, which is projected to remain around half. Again, this will be largely due to the continued rapid growth of China and India.
http://www.treasurer.gov.au/DisplayDocs.aspx?pageID=&doc=speeches/2006/026.htm&min=phc

 

[dhukka]

I'm inclined to think decoupling is progressing steadily.

I heard on a news broadcast a few days ago that China and India accounted for about 1/4 of world GDP about five years ago while USA accounted for 1/3. Now the numbers are reversed with the USA accounting for about 1/4 and China and India 1/3.

I have postulated earlier about the exaggeration of the impact of a x% downturn in the US having a similar or worse impact on China in particular... it won't happen.

For what it's worth, I have stated on other threads that I believe decoupling will happen. However it is still way too early. Despite the oft repeated platitudes of China rapidly modernising, China's economy is more export dependent on the US and Europe than it has ever been. I have posted the evidence previously in this thread.

2007 GDP estimates in $US

USA 13.5 trillion
China 3.1 trillion
India 1.0 trillion

Here's a tip, try doing you're own research rather than listen to some muppet on the radio or TV.

 

[IFocus]

I get the feeling that people just think the current growth / expansions rates will just continue on un-interrupted in China and Indian.

Any economy growing at 10% or more year on year brings enormous problems its called a bubble, as soon as the Olympics are out of the way China will all most certainly have to get the pin out US recession or no US recession.

How this will feed back to Oz is very hard to judge IMHO but it will be nothing like the present, the future will all ways bring change good and bad.

 

[Whiskers]

For what it's worth, I have stated on other threads that I believe decoupling will happen. However it is still way too early. Despite the oft repeated platitudes of China rapidly modernising, China's economy is more export dependent on the US and Europe than it has ever been.

That may be so, but a bit of a US slowdown doesn't equate to disproportional effect on, or a collapse of the chinese economy.

2007 GDP estimates in $US

USA 13.5 trillion
China 3.1 trillion
India 1.0 trillion

Here's a tip, try doing you're own research rather than listen to some muppet on the radio or TV.

IMF October 2007.

Country................GDP (PPP) $m

United States.........13,543,330 - 19.02%

China....................11,606,336 - 16.551%
Hong Kong..................289,748 - .402%
China (Taiwan)............749,943 - 1.034%
Total China.............12,646,027 - 17.987%

India.......................4,726,537 - 6.576%

Total China + India..17,373,164 - 24.563%

Now as I said these are Oct 07 numbers. I reckon the numbers I heard quoted is from someone who has taken into account the recent changes in the economy. As you can see your estimates of the impact of the US economy are going to be a bit off if you ain't using the right raw data.

Dhukka, I'm not prone to personal clashes, but I reckon you earnt this one.

Here's a tip.

There's an old proverb that goes something like; better make sure of your facts before you start getting too . :

http://www.imf.org/external/pubs/ft...,111&s=PPPGDP,PPPSH&grp=0&a=&pr1.x=88&pr1.y=8

 

[ithatheekret]

I hate to say this to ya Whiskers , but I wouldn't rely on the IMFs data either and data for what it is ......... is only information collected that has been allowed to be received in the first place .

There was this wonderful spin that Russia was going to sell it's platinum off like all the wetern centrals did with more than just their gold , I have seen documented statements coming from the IMF in relation to that story ..... and it was bollocks , provided a wonderful dip though , just like the Indians wedding stories and the Indian dealers , the fact is it is a very small market and when lots of people try to get into a small space , somebody usually gets squeezed out .

The UN was made to be seen as the disgusting joke it really is behind all the shadows of goodness . It getting close to clean house time just about everywhere , the IMF and the UN inclusive . Sure some of the people are doing meaningful things , unfortunately the head honchos always seem to be trouble magnets . When they get brought undone , it's an Ockhams razor theory that they've managed to upset somebody .......... somebody big . I'll give you a few clues . He doesn't speak Russian and he can't read English and he looks at pictures upside down .

PS.... If you want to see the true IMF try something simple for starters , go to Goggly Boggly search engine and type in IMF + mistakes ........ it does not make happy reading , but you will definitely need to clear your cache afterwards .

 

[Freeballinginawetsuit]

I hate to say this to ya Whiskers , but I wouldn't rely on the IMFs data either and data for what it is ......... is only information collected that has been allowed to be received in the first place .

There was this wonderful spin that Russia was going to sell it's platinum off like all the wetern centrals did with more than just their gold , I have seen documented statements coming from the IMF in relation to that story ..... and it was bollocks , provided a wonderful dip though , just like the Indians wedding stories and the Indian dealers , the fact is it is a very small market and when lots of people try to get into a small space , somebody usually gets squeezed out .

The UN was made to be seen as the disgusting joke it really is behind all the shadows of goodness . It getting close to clean house time just about everywhere , the IMF and the UN inclusive . Sure some of the people are doing meaningful things , unfortunately the head honchos always seem to be trouble magnets . When they get brought undone , it's an Ockhams razor theory that they've managed to upset somebody .......... somebody big . I'll give you a few clues . He doesn't speak Russian and he can't read English and he looks at pictures upside down .

PS.... If you want to see the true IMF try something simple for starters , go to Goggly Boggly search engine and type in IMF + mistakes ........ it does not make happy reading , but you will definitely need to clear your cache afterwards .

Apples..........Oranges .

 

[ithatheekret]

Is that it ..... an idiom ?

 

[Freeballinginawetsuit]

Is that it ..... an idiom ?

I don't see the relevance of youre comparison . On the topic of China's GDP, IMO any stats out of China should be taken with a grain of salt.

A more relevant (and accurate lol) stat would probably be US TT's..........

China Imports YTD Nov:295.8B
China Exports YTD Nov:58.3B (most to offshore invested US Co's on the mainland)
US TT's Percentile:12.4%

Offshore invested co's suppling the essential discretionary and non discretionary (bang for ya buck) items that the narrow sighted/highly geared and illiquid yanks will least do with out in a recession.

On an I/E defeciency basis, China pegs Canada markedly for top spot although Canada largely trades on a par with the US and pegs 1st place for total trades.

Personally I feel that Canada/Germany's TT's will suffer the greatest if uncle sam indeed drowns in his muck

 

[Whiskers]

I hate to say this to ya Whiskers , but I wouldn't rely on the IMFs data either and data for what it is ......... is only information collected that has been allowed to be received in the first place .

Yeah ithatheekret, thats true, but we have to work with something. Do you have a better data source that I could use?

The following site link provides estimates by the IMF, World Bank and the CIA.

They vary a bit, but they all give the US about $13 trillion. The CIA gives China (inc Taiwan & Hong Kong) $8.02 trillion and India $2.96 trillion. The World Bank gives China (inc Taiwan & Hong Kong) $6.16 trillion and India $2.34 trillion.

I 'm not sure where dhukka sourced his numbers from, but his numbers for China and India are considerably less than all three of these.

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

 

[Whiskers]

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

Looks like I missed a bit on that link. Try this.

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

 

[wayneL]

Looks like I missed a bit on that link. Try this.

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

Not exactly a third then. Not even a quarter according to some. But certainly more than I thought.

 

[dhukka]

That may be so, but a bit of a US slowdown doesn't equate to disproportional effect on, or a collapse of the chinese economy.


IMF October 2007.

Country................GDP (PPP) $m

United States.........13,543,330 - 19.02%

China....................11,606,336 - 16.551%
Hong Kong..................289,748 - .402%
" China (Taiwan)............749,943 - 1.034%
Total China.............12,646,027 - 17.987%

India.......................4,726,537 - 6.576%

Total China + India..17,373,164 - 24.563%

Now as I said these are Oct 07 numbers. I reckon the numbers I heard quoted is from someone who has taken into account the recent changes in the economy. As you can see your estimates of the impact of the US economy are going to be a bit off if you ain't using the right raw data.

Dhukka, I'm not prone to personal clashes, but I reckon you earnt this one.

Here's a tip.

There's an old proverb that goes something like; better make sure of your facts before you start getting too . :

http://www.imf.org/external/pubs/ft...,111&s=PPPGDP,PPPSH&grp=0&a=&pr1.x=88&pr1.y=8

I hope you savoured your moment of victory because it's about to be shattered. It actually helps if you understand the data you're looking at. All you need to know about the link you provide to wikipedia is the first few lines.

There are three lists of countries of the world sorted by their gross domestic product (GDP) (the value of all final goods and services produced within a nation in a given year). The GDP dollar estimates given on this page are derived from Purchasing Power Parity (PPP) calculations. Using a PPP basis is arguably more useful when comparing generalized differences in living standards on the whole between nations because PPP takes into account the relative cost of living and the inflation rates of the countries, rather than using just exchange rates which may distort the real differences in income.

PPP as suggested above is useful if you want to compare living standards but that's not what we are debating here. You'll notice that the currency they use is international dollars. I don't know anyone who owns international dollars. You know why that is? Because they don't exist, it is a fiction created by these agencies to compare general standards of living between countries.

The figures I supplied are in $US dollars.

Here is a link that shows China's GDP in $US at current exchange rates and GDP at PPP. Note these figures are for 2006.

GDP (US$ bn; market exchange rate) 2,765.4

GDP (US$ bn; purchasing power parity) 9,982.5

I took the 2006 number and applied China's current growth rate to get my approximation of $3.1 trillion.

I am sure of my facts because I do the research and don't just cut and paste.

Here's another tip for ya,

"It's better to remain silent and thought a fool, than to open your mouth and remove all doubt."