THE LIBERTARIAN ENTERPRISE
Number 509, March 8, 2009
"A bust has become a panic and is
well on its way to becoming a rout."
Distribute widely and attribute to The Libertarian Enterprise
As stocks continue to decline, the "bottoming process" appears to be entirely imaginary. A bust has become a panic and is well on its way to becoming a rout.
To get a sense of where things are going, let's take a brief look at some of the damage so far. We already know about major stocks like Bear Stearns, Merrill Lynch, and Lehman Brothers either failing utterly or declining to the point where they've been bought out.
You've probably heard about the enormous bailout funds provided to worthless scam companies. One of these, characterized as a scam in a recent New York Times editorial, is AIG. At its peak on 10 November 2000, AIG traded at $102.56. During the peak performance for the overall stock market, at 9 October 2007, AIG traded at $70.13. Today it closed at $0.35.
AIG, with on the close order of $175 billion in taxpayer dollars bailing out its bad management from their stupid decisions, is now a penny stock. Its price is off its 2000 peak by 99.66%. By any normal standard, it should be de-listed from trading on the New York Stock Exchange. One of the board's rules is, "average closing price of at least $1 over a consecutive 30 trading-day period." The average closing price for AIG for the last 30 days is below 75 cents a share. It has closed below a dollar a share every day since 10 February 2009but I guess scum like Edward Liddy and David Herzog can get their worthless scam stock listed on the NYSE because they have political connections.
Consider financial giant and global multinational banking gangster outfit Citigroup. Their peak stock price was 28 December 2006 at $57 per share. The stock traded earlier today at $0.99 and closed at $1.02 per share. Here's a stock the taxpayers own in a big way, down 98.2% from its peak. The government sure knows how to pick 'em.
JP Morgan Chase might have been expected by some to weather the current turbulence, but Moody's has lowered its outlook on JPM ratings, and the stock lost 14% of its value today (5 March 2009). From a peak price 24 March 2000 of $67.20 the stock has collapsed to just $16.60 today, and there's no reason to imagine that its losses are over. CEO James Dimon is overseeing a company which has lost 75% of its stock value so far.
Politically connected Goldman Sachs is also down substantially. Their peak price was 31 October 2007 at $250.70. They closed today at $81.72, over 4% down on the day's trading. So, their stock price has fallen 67.4% from its peak. Is this what passes for a healthy finance industry company? Wow.
Compare to Bank of America corporation, which peaked at $54.98 on 14 November 2006. They closed today at $3.17, off nearly 12% on the day's trading. The ingenuity of CEO Kenneth Lewis should be lauded. He runs a company trading 94% off its peak stock price.
And lets look at Wells Fargo. Their stock plunged almost 16% to close at $8.12 today. It traded at $44.75 on 19 September 2008. CEO John Stumpf presides over a company trading 81.9% below its peak stock price.
But, you say, none of these companies make anything. Well, how about GM and Ford? They aren't yet penny stocks, but things don't look good for either auto maker. Both are now getting taxpayer money in bailouts.
GM dropped about 15% today to close at $1.86. On 28 April 2000, GM traded at an astonishing $94.62. The wrong arrogant Richard Wagoner is CEO of a company which today trades off its peak by 98%.
Ford traded at $38.57 on 4 May 1999. Today it closed at $1.81. Chairman William Clay Ford Jr. might have something in common with Henry Ford, in that the stock probably traded about the same in Henry's day, *lol*. The current share price is off the peak by 95.3%.
The same analysis can be performed on many other companies. I haven't examined sectors like newspaper publishing where the red ink has forced many companies into bankruptcy.
Are stocks cheap at these prices? If you believe in earnings per share measures, perhaps. But, the trend can be your friend. If you wait a while, stocks that look cheap today might be even cheaper in a few weeks, or out of business.