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WSJ summary 5

WSJ summary 5 - 3 What three recommendations did Clement...

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        Due Date:  10/10/07     Name:  FNCE 4030 FNCE 4030 Weekly Wall Street Journal Assignment Submission Form Article Title: Margin for Error: How Stocks Could Be Hit By Falling Prices Publication Date:  10/03/2007 page D1 1. Why can’t corporate earnings continue to grow as a % of GDP? Corporate earnings cannot continue to grow as a % of GDP because “its  impossible for it to be sustained because, if it was, all income would be profits.”  Corporate earnings are also affected by international growth so there are other  factors involved.  2. Is this a short-term problem or a long-term problem? This seems to be a short-term problem in regards to the expected profits for  shareholders in the 3 rd  quarter. The situation seems to be long term because  growth will slow down eventually but not at this moment. The author believes that  stocks will face a lower return years ahead because of the slowing in growth. 
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Unformatted text preview: 3. What three recommendations did Clement make for those investing for their retirement account? The three recommendations for investors interested in their retirement account are to invest in foreign stock markets, keep investment and portfolio tax bills low, and finally rein in your expectations. 4. Do some math on this. When reading an article like this, you should always go back and check the numbers to make sure that you understand the points (and that they are accurate). Use the data in paragraphs 7 & 8 to verify that the relative growth rates of earnings and GDP mesh with the % of GDP earnings represent in 1990 and 2006. Corporate growth = 8.2% a year Economic growth = 5.3 a year, 2.9% spread 1990 corporate= 8.6% profit 2006 corporate profit = 13.3% (1.029)^16 X 8.6= 13.3 math checks out...
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WSJ summary 5 - 3 What three recommendations did Clement...

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