WSJ: What Your Need to Know About Price Earnings Ratios

By SIMON CONSTABLE

The price of a stock doesn't tell you anything about whether it's a good deal, but the so-called price/earnings ratio can help. The trick is figuring out which P/E ratio to use.

Obviously, just because one stock is $200 a share and another $12 doesn't mean the latter is cheaper in terms of what you're getting. For a better gauge, you need to calculate what you are paying for each dollar of company earnings. Hence, the P/E ratio, derived by dividing the price of the stock by one year of per-share earnings. So if one stock has a P/E of 12 and the other of 10, the latter is cheaper. Read original story here.

By SIMON CONSTABLE



Friday we got news that jobs remain scarce in the U.S. Unemployment is still hovering around 8 percent but that doesn’t really give any sense of just how bad things are for the vast majority of Americans. Thursday last week I heard a presentation by Professor Matthew Slaughter of Dartmouth’s Tuck school of business. It was sobering to say the least. First he pointed out: it will take until 2020 for the economy to get back the number of jobs we had at the beginning of the great recession. It gets worse. Even if you have a job, your earnings are being eroded. Median pay adjusted for inflation has fallen since 1989. It should be a reminder to anyone who thinks we’re on the road to recovery that it will be a long road.

WSJ: Are Mom and Pop Heading for Wall Street? .

By SIMON CONSTABLE

Like the host of "The Price Is Right" TV game show, Wall Street is saying "Come on down!" 

Investment professionals are anticipating an influx of income- and growth-hungry mom-and-pop "retail" investors into the stock market this year—especially as the economy picks up and pressure grows for interest rates to start rising. See original story here.

Fox News Channel: Debt Ceiling Discussion

Michael Castner on WhoSay

NBR: Fiscal Cliff Problems Still Loom

By SIMON CONSTABLE

If the shenanigans in Congress at year end have taught us anything it’s that Washington just
can’t help but do stupid things.  While the tax situation for many Americans may now have been solved, the problem of spending cuts hasn’t. 

That’s bad in itself, not getting an important job done, but it’s also actually harmful to the U.S.  economy.  Not solving it has increased what economists call policy uncertainty.  Broadly speaking that’s ambiguity around what the government is going to do with laws etc.  When uncertainty is high, businesses, the real drivers of job growth in the economy, tend to invest in fewer factories and hire fewer people. 

Despite Congress having managed to avoid the fiscal cliff, uncertainty in the U.S. is still elevated.  How do we know?  

The smart people at Stanford and Chicago measure it in the U.S. economic policy uncertainty index.  That index is now around three times the level it averaged during 2006.  In a recent paper, the same authors that track uncertainty say "Increases are driven mainly by tax, spending and healthcare policy uncertainty."  

The consequence:  lower economic growth and millions of potential jobs lost.  Now if our government can just get its act together, provide some clarity and then get out of the way of
the private sector then maybe our economy can get roaring again, just like it used to.

Photo by Louis Velazquez on Unsplash

WSJ: How to Boost Income Without Too Much Risk

By SIMON CONSTABLE

The Federal Reserve last week pledged to keep interest rates low until the jobs picture improves massively.

Sounds great, right? But not for investors searching for significant income. The Fed's decision to stay on its low-interest course means safe investments like government bonds, money-market funds and certificates of deposit will continue paying peanuts. See more here.

Barrons: Lumber to Soar in the Long Run

By SIMON CONSTABLE

Futures prices for lumber have been riding a wave churned by hurricane Sandy. Quotes for plywood have surged 15%, to $340 per thousand board feet, since the beginning of October, propelled by the prospect of rebuilding in the northeastern U.S. after Sandy's onslaught.

Investors thinking about jumping on lumber for the short term will likely get wiped out. But those willing to hang in for the long haul could enjoy a sweet ride. Read original story here.

Photo by Facundo Sosa on Unsplash