The caution extends beyond the U.S. More than 54 percent of ratings for companies in the U.S., U.K., Japan, and Brazil are “holds,” the highest level since Bloomberg began tracking the data in 1997. While the proportion of “sell” ratings in the U.S. has fallen to 5.1 percent, half the level of 2003, the total combined with “holds” reached a record 71 percent last month, the data show.
While pessimism is increasing, analysts say profits for companies in the MSCI World Index of 24 developed nations will gain 28 percent in the next year. The MSCI index trades at 11.4 times forecast profit, data compiled by Bloomberg show. Except for the six months starting October 2008, the index has never traded below 12.5 times annual earnings.
Shields says his biggest concern is that joblessness will weaken consumer spending, which accounts for 70 percent of the U.S. economy. “Employment is much worse than what people have anticipated,” he says. “If I had to pick one single factor that underlies our negativity, that’s what it is.”
They’re turning more pessimistic even as they push up profit growth estimates. How joblessness will affect consumer spending is a big worry
By Rita Nazareth and Lynn Thomasson
Meyer Shields says earnings at Warren Buffett‘s Berkshire Hathaway (BRK.A) will increase the most since 2006 this year. He’s also telling investors to sell the shares because the economic recovery is weakening.
When it comes to sending mixed messages, the Stifel Nicolaus analyst has plenty of company. For the first time since at least 1997, fewer than 29 percent of ratings on stocks covered by brokerages worldwide are “buys,” according to 159,919 recommendations compiled and tracked by Bloomberg. Analysts are turning more pessimistic even as they push up profit-growth estimates among Standard & Poor’s 500-stock index companies to 36 percent, the highest since 1988.
“People are sitting on a fence,” says Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $550 billion.
“When I go and talk to our equity analysts, they look at the companies and say, ‘Boy, these companies look pretty good, earnings are O.K., they have plenty of cash. What if there’s a double dip?'” Leer más “Why Analysts Don’t Want to Say ‘Buy’”
The master has spoken in his freshly released letter to shareholders and as usual, it is filled with brilliance, hypocrisy and more brilliance. You can read the full letter here. I will keep my personal thoughts on the letter short and sweet, but a few things stood out to me:
Buffett appears to attempt to distance himself from the notion of “too big to fail” and implies that the firm is not dependent on the “kindness of strangers”:
“We will never become dependent on the kindness of strangers. Too-big-to-fail is not a fallback
position at Berkshire. Instead, we will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity.”
These are interesting comments now that we know Buffett in fact played a role in orchestrating the bank bailouts (see here for his letter to Hank Paulson). Of course, Buffett had a substantial amount at stake if the banks were allowed to implode. As Barry Ritholtz has previously shown, Buffett did indeed rely on the kindness of strangers. He claims to have been a supplier of capital, but this was nothing more than doubling down on bad bets that he had made with the hope that the government would ultimately step in. Of course, we all know they did. I don’t know how he can make such comments when it is so obvious that he directly benefited from the bank bailouts and played an instrumental role in orchestrating them? It’s disingenuous at best.
A few other things that jumped out:
- His discussion on risk management (p. 16) should be required reading for every CEO and money manager in America.
- He is still extraordinarily funny.
- He sounds very optimistic about the state of the housing market.
- He sells his company and the idea behind Berkshire better than any CEO on the planet.
For more reading please see his annual letters from the Buffett Partnership days.
© 2009 pragcap.com