Ritchie that is.
Here\’s one of today\’s bits:
Now I know we have to view things in the round, but let’s not put too fine a point on it and say our economy remains in profound difficulties, largely as a result of government policy. Growth is stumbling at best, unemployment is up and clearly heading much higher, government borrowing is ahead of expectations despite the mantra of cuts, tax revenue growth is weak, and that’s before a massive hit in consumer confidence in the New Year from a VAT rise and the real impact of cuts begins to hit.
In that case it is hard to justify the FTSE being at 6,000 for any fundamental reasons.
Hmm. Now I don\’t claim in any manner at all to be able to read the market tea leaves here but just pondering.
The value of shares is, among other things (like the amount that can be earned elsewhere) determined by the net present value of the future dividend stream. So, if we think that the dividend stream is going to rise in the future then shares are more valuable now. And many things might lead us to think that that future dividend stream is going to get larger.
Yes, even if we don\’t expect much growth in the economy, even if there\’s going to be unemployment etc. For example, we might think that the proportion of that static economy which goes to profits, and thus to dividends, is going to rise. If you wish, greedy capitalist bastards screwing more out of the sweat of the workers\’ brows.
Thing is, though, is there any reason to think this might be true of our near future?
Oh, yes there is in fact. And here\’s what Ritchie said about this only 6 short months ago:
What a jolly time to be in business: profits rise as the share for labour falls – yes that’s what they forecast
Now, no, I don\’t insist that this is the reason for FTSE at 6,000.
But I really do wish that Ritchie would just join up the dots between his different pronouncements. The profit share rising is a fundamental reason for high share values. And it\’s him that was pointing to that profit share rising: so how come there are \”no\” fundamental reasons for current share prices?