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The Commoditization Of The Stock Market

Does anybody but me believe the market is suffering from some kind of attention deficit disorder? Our economic setting stands near normalcy with the Federal Reserve Board little to do but monitor employment stats and look under rocks for Mr. Inflation. But, he’s nowhere to be found.

We have a new generation of money managers who missed the seventies and early eighties when the FRB meant business. Ask Paul Volcker who single-handedly drove down the market to book value with a 6% yield. Does anybody but me remember 15% rates on 5-year agency paper that was considered junk?

What’s happened to the fundamentalist approach to investing in equities? Hardly anyone cares about the return on equity for major corporations, their dividend payout ratios and the optimum level of debt for capital spending and share buybacks.

Page one of the financial press, ad nauseam, is covered with think pieces on exactly when the Fed makes some token increase in money market rates based on employment stats. A spotlight shines on China’s leading indicators and the violent undulations of the Shanghai bourse. Is their true growth rate 4% or 7%? Probably 4%.

Our market reacts violently, time and again, to the same macro issues although nobody can parse accurately their ultimate impact on us. Oil at $40 a barrel hurts Russia a helluva lot more than us, unless you’re a bank top heavy in oil field loans to thinly capitalized operators. Decades ago, the Continental Illinois National Bank floundered on soured oil field paper.

More ‘n’ more, the market has turned into one deep snake pit where the writhing reptiles pretty much display comparable stripings and hiss in unison. Facebook is no different than Amazon, Google or Allergan. They are viable, pricey growth stocks that rise and fall in comparable amplitude. The exception is Netflix where valuation and beta are extreme.

Despite disparities in their businesses almost all manufacturers act poorly. General Motors no different than Boeing or Honeywell International, Dow Chemical or United Technologies in its price trajectory. All this despite its product...


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