RE:RE:PM I Got - Some Further ThoughtsSpanito wrote: If you look at today's share price compared to others in Canada today, one must say "Tsk Tsk Tsk".
Growth? as Obscure had pointed out, there is no growth, buybacks and low paying dividends aren't going to solve Suncor's real issues at hand. As others have stated, Government of Canada (Liberals) need to be removed asap, and a Conservative pro Energy Government need to be implemented asap. Like Now, not tomorrow, tomorrow will be too late.
This part I loved my friend, it is reality to it's fullest.
"Conversely, if you think market will go down, the question is "What do you think will cause people to take money out of the market?" I can think of lots of reasons. The two main ones are higher interest rates providing a safe place to get a decent return on your money and fear." Spanito
Experienced wrote: One of the big determinants of whether the market will go in a recession depends on how high the Fed raises interest rates. There is an inverse relationship between interest rates and the overall market P/E ratio.
Here is the problem to solve...
1....the way inflation is calculated today compared to the past is that it was changed in 1982 during the throws of the big inflation of the mid to late 70 and the early 80s. The media like to compare current inflation rates to those of the early 1980s but that is comparing apples and oranges due to the calculation differences. If we used the way it was calculated back then and applied it to todays situation. instead of seeing the latest figure of around 8.5 we would get somewhere around 11 - a big difference and a big delta between the current Fed discount rate and that number.
2....in the past the US Fed and other Central Banks did engage in some degree of bond buying and selling (otherwise called QE and QT) but nowhere near the degree we saw during and subsequent to the Great Recession of 2008. Central Banks around the World have bloated balance sheets that they have to deal with. The problem is that there is really no economic theory to measure the effect of these actions and what the equivalency of these actions are to a simple increase in the discount interest rate...uncharted waters.
In this situation, IMO, it is virtually impossible for Jay Powell and other Central Bankers to get it right and to me that is a big worry. Particularly, as has been seen so far and reinforced by his speech at Jackson Hole, is that he will take a cautious approach. My judgement is that he is already behind the curve and with a cautious approach will get even further behind the curve and be forced to raise rates higher than he would have if The Fed took a more hawkish approach. This is what happened in the early 1980s where The Fed got so far behind that they had to spike interest rates to 20%.
Will they get that high again?
Who knows.
But if they do then the math for the relationship between interest rates and the market P/E ratio for which there is ample data and economic theory would mean a decline in the market approaching that of the Great Depression of the 1930s where the market fell 90% at its depths and basically lasted 10 years until there was a world war.
This is scary stuff. Is it perhaps too negative? I don't know at this point.
But another way to look at all this is the following. Stock prices like anything else depend on basic supply and demand. So if for example you were a stock market bull, the question I would ask is "What do you see in the near future that would cause people to pour new money into the market?" Perhaps it's a lack of imagination on my part but short of unprecedented Government deficit spending there isn't anything I can think of.
Conversely, if you think market will go down, the question is "What do you think will cause people to take money out of the market?" I can think of lots of reasons. The two main ones are higher interest rates providing a safe place to get a decent return on your money and fear.
We are not going to get a change in Government at the Federal level thanks to the deal struck by the NDP and the Liberals for many months not days. In the next election, much will depend on the Conservatives getting somebody with charisma who can defeat Trudeau. IMO the current candidates don't fit that description.
That said, the most immediate way for SU to see its SP go to where the metrics say it should be is through hiring a new CEO with vision who is willing to change the company into a growth company. Right now on that topic you could hear a pin drop in terms of any discussion about potential candidates.