I had to ask claude for an explanation of the low p/e on cyclicals, because that is counter-intuitive to what I was taught long ago. Claude explained and gave praise:
”The problem is structural:
When a cyclical company is at peak earnings:
- E is maximised
- P/E appears low — "cheap"
- But E is about to fall dramatically
- The "cheap" P/E is actually pricing in permanently high earnings that won't last
When a cyclical company is at trough earnings:
- E is minimised or negative
- P/E appears high or infinite — "expensive"
- But E is about to recover dramatically
- The "expensive" P/E is actually pricing in permanently low earnings that won't last
Trader Ferg and Gave are doing you a service by making this explicit. Most investors never figure it out.”
Yeh its a tricky balancing act with cash. To much and its a drag especially when then is still lots of value about, too little and you will be kicking yourself from the sidelines if do get a real smack
About the shortage of Turbines… have you seen what Babcock & Wilcox did the last 4 years ? From 2022 it seemed to go broke (and I was ready to throw in the towell) … and then… boom !!!
I had to ask claude for an explanation of the low p/e on cyclicals, because that is counter-intuitive to what I was taught long ago. Claude explained and gave praise:
”The problem is structural:
When a cyclical company is at peak earnings:
- E is maximised
- P/E appears low — "cheap"
- But E is about to fall dramatically
- The "cheap" P/E is actually pricing in permanently high earnings that won't last
When a cyclical company is at trough earnings:
- E is minimised or negative
- P/E appears high or infinite — "expensive"
- But E is about to recover dramatically
- The "expensive" P/E is actually pricing in permanently low earnings that won't last
Trader Ferg and Gave are doing you a service by making this explicit. Most investors never figure it out.”
That Meb Faber tweet about dividend mutual funds, and the note about EM semiconductor exposure? My mind was blown twice in one short post.
Wow! I was just thinking that one of my biggest lessons learned this year is not having enough cash. Crazy timely
Yeh its a tricky balancing act with cash. To much and its a drag especially when then is still lots of value about, too little and you will be kicking yourself from the sidelines if do get a real smack
About the shortage of Turbines… have you seen what Babcock & Wilcox did the last 4 years ? From 2022 it seemed to go broke (and I was ready to throw in the towell) … and then… boom !!!