From:S&P- S&P is too high!

[Smash]

A report from S&P web site shows the current P/E ratio is 140. P/E is at the bottom of their web page.
http://www2.standardandpoors.com/por...0,0,0,0,0.html

From 1936 through 2008, the highest the P/E was 60.7. Average is 15.98. During recessions the P/E ratio has historically been in the single digits, not triple digits.

Price/Earnings= 140
Yesterdays S&P was 1,040
1,040/E = 140 so that E=7.43
If the average earnings of 15.98 is used, the S&P should be at 118. 118/7.43=15.98


http://www2.standardandpoors.com/spf...00pe_ratio.xls

STANDARD & POOR'S INDEX SERVICES
S&P 500 Historical As Reported P/E Ratio
P/Es are based on trailing 12-month earnings
There is a quarter lag in posting due to reporting
QUARTER	12 MO P/E
12/31/2008	60.70
09/30/2008	25.38
06/30/2008	24.92
03/31/2008	21.90
12/31/2007	22.19
09/30/2007	19.42
06/30/2007	17.70
03/31/2007	17.21
12/31/2006	17.40
09/30/2006	17.00
06/30/2006	17.05
03/31/2006	17.82
12/30/2005	17.85
09/30/2005	18.46
06/30/2005	18.80
03/31/2005	19.57
12/31/2004	20.70
09/30/2004	19.29
06/30/2004	20.32
03/31/2004	21.66
12/31/2003	22.81
09/30/2003	25.82
06/30/2003	28.21
03/31/2003	27.97
12/31/2002	31.89
09/30/2002	27.14
06/30/2002	37.02
03/31/2002	46.45
12/31/2001	46.50
09/30/2001	36.77
06/30/2001	33.28
03/31/2001	25.54
12/31/2000	26.41
09/30/2000	26.75
06/30/2000	28.02
03/31/2000	29.41
12/31/1999	30.50
09/30/1999	29.18
06/30/1999	33.46
03/31/1999	33.52
12/31/1998	32.60
09/30/1998	26.70
06/30/1998	29.10
03/31/1998	27.86
12/31/1997	24.43
09/30/1997	23.31
06/30/1997	21.83
03/31/1997	18.82
12/31/1996	19.13
09/30/1996	19.09
06/30/1996	19.21
03/31/1996	18.96
12/31/1995	18.14
09/30/1995	16.61
06/30/1995	15.82
03/31/1995	15.38
12/31/1994	15.01
09/30/1994	16.93
06/30/1994	17.63
03/31/1994	19.63
12/31/1993	21.31
09/30/1993	22.49
06/30/1993	23.31
03/31/1993	22.77
12/31/1992	22.82
09/30/1992	23.16
06/30/1992	23.94
03/31/1992	24.93
12/31/1991	26.12
09/30/1991	21.77
06/30/1991	19.12
03/31/1991	17.92
12/31/1990	15.47
09/30/1990	14.08
06/30/1990	16.84
03/31/1990	15.69
12/31/1989	15.45
09/30/1989	14.74
06/30/1989	12.61
03/31/1989	11.81
12/31/1988	11.69
09/30/1988	11.96
06/30/1988	12.62
03/31/1988	13.93
12/31/1987	14.12
09/30/1987	20.29
06/30/1987	21.08
03/31/1987	19.32
12/31/1986	16.72
09/30/1986	15.58
06/30/1986	17.05
03/31/1986	16.45
12/31/1985	14.46
09/30/1985	11.96
06/30/1985	12.29
03/31/1985	11.02
12/31/1984	10.05
09/30/1984	10.03
06/30/1984	9.46
03/31/1984	10.43
12/31/1983	11.76
09/30/1983	12.49
06/30/1983	13.32
03/31/1983	12.32
12/31/1982	11.13
09/30/1982	8.88
06/30/1982	7.74
03/31/1982	7.56
12/31/1981	7.98
09/30/1981	7.61
06/30/1981	8.74
03/31/1981	9.33
12/31/1980	9.16
09/30/1980	8.57
06/30/1980	7.65
03/31/1980	6.68
12/31/1979	7.26
09/30/1979	7.47
06/30/1979	7.36
03/31/1979	7.64
12/31/1978	7.79
09/30/1978	8.86
06/30/1978	8.51
03/31/1978	8.17
12/31/1977	8.73
09/30/1977	9.01
06/30/1977	9.64
03/31/1977	9.76
12/31/1976	10.84
09/30/1976	11.02
06/30/1976	11.27
03/31/1976	11.87
12/31/1975	11.33
09/30/1975	10.81
06/30/1975	11.96
03/31/1975	9.87
12/31/1974	7.71
09/30/1974	6.97
06/30/1974	9.84
03/31/1974	11.24
12/31/1973	11.95
09/30/1973	14.10
06/30/1973	14.42
03/31/1973	16.40
12/31/1972	18.39
09/30/1972	18.00
06/30/1972	17.95
03/31/1972	18.45
12/31/1971	17.91
09/30/1971	18.11
06/30/1971	18.55
03/31/1971	19.22
12/31/1970	17.96
09/30/1970	15.73
06/30/1970	13.17
03/31/1970	15.92
12/31/1969	15.93
09/30/1969	15.81
06/30/1969	16.73
03/31/1969	17.44
12/31/1968	18.03
09/30/1968	18.14
06/30/1968	17.88
03/31/1968	16.58
12/31/1967	18.10
09/30/1967	18.25
06/30/1967	17.01
03/31/1967	16.55
12/31/1966	14.47
09/30/1966	13.89
06/30/1966	15.52
03/31/1966	16.71
12/31/1965	17.81
09/30/1965	18.06
06/30/1965	17.38
03/31/1965	18.41
12/31/1964	18.63
09/30/1964	18.83
06/30/1964	18.87
03/31/1964	18.89
12/31/1963	18.66
09/30/1963	18.11
06/30/1963	18.07
03/31/1963	17.94
12/31/1962	17.19
09/30/1962	15.94
06/30/1962	15.78
03/31/1962	20.64
12/31/1961	22.43
09/30/1961	21.88
06/30/1961	21.33
03/31/1961	21.06
12/31/1960	17.77
09/30/1960	16.37
06/30/1960	17.46
03/31/1960	16.32
12/31/1959	17.67
09/30/1959	16.58
06/30/1959	17.20
03/31/1959	17.83
12/31/1958	19.10
09/30/1958	17.38
06/30/1958	15.44
03/31/1958	13.41
12/31/1957	11.87
09/30/1957	12.22
06/30/1957	13.85
03/31/1957	12.97
12/31/1956	13.69
09/30/1956	13.11
06/30/1956	13.05
03/31/1956	13.14
12/31/1955	12.56
09/30/1955	12.69
06/30/1955	12.74
03/31/1955	12.36
12/31/1954	12.99
09/30/1954	12.29
06/30/1954	11.15
03/31/1954	10.56
12/31/1953	9.88
09/30/1953	9.16
06/30/1953	9.62
03/31/1953	10.41
12/31/1952	11.07
09/30/1952	10.40
06/30/1952	10.67
03/31/1952	10.15
12/31/1951	9.74
09/30/1951	9.27
06/30/1951	7.71
03/31/1951	7.56
12/31/1950	7.19
09/30/1950	7.15
06/30/1950	6.96
03/31/1950	7.30
12/31/1949	7.22
9/30/1949	6.52
6/30/1949	5.90
3/31/1949	6.33
12/31/1948	6.64
9/30/1948	7.48
6/30/1948	9.00
3/31/1948	8.82
12/31/1947	9.50
9/30/1947	9.75
6/30/1947	10.56
3/31/1947	11.94
12/31/1946	14.43
9/30/1946	16.81
6/30/1946	21.94
3/31/1946	20.09
12/31/1945	18.08
9/30/1945	16.32
6/30/1945	14.96
3/31/1945	14.21
12/31/1944	14.28
9/30/1944	14.20
6/30/1944	14.11
3/31/1944	12.92
12/31/1943	12.41
9/30/1943	11.19
6/30/1943	11.23
3/31/1943	10.82
12/31/1942	9.49
9/30/1942	9.41
6/30/1942	8.47
3/31/1942	7.70
12/31/1941	7.49
9/30/1941	8.57
6/30/1941	9.04
3/31/1941	9.40
12/31/1940	10.08
9/30/1940	9.87
6/30/1940	9.60
3/31/1940	12.37
12/31/1939	13.88
9/30/1939	16.07
6/30/1939	14.29
3/31/1939	15.46
12/31/1938	20.64
9/30/1938	19.74
6/30/1938	15.01
3/31/1938	8.76
12/31/1937	9.34
9/30/1937	11.28
6/30/1937	13.16
3/31/1937	16.14
12/31/1936	16.84
Average P/E	15.98

[vinoveri]

Re: From:S&P- S&P is too high!

When you put your chips down on the roulette table, do you ask what the P/E is?;)

It's all about growth, double your money, fundamentals don't matter one bit as long as money is in "infinite" supply.
:eek:

[Smash]

Re: From:S&P- S&P is too high!

The stock market is gambling with the house at a known advantage? I wish to invest, with a reasonable probability of the return of my investment plus profit.

[pianodoctor]

Re: From:S&P- S&P is too high!

Thanks, Smash, I needed that. I put S&P 500 shorts in place a few weeks ago but it's been making me nervous the way this rally won't let up. I needed a little "affirmation".

[Smash]

Re: From:S&P- S&P is too high!

I'm waiting for the herd to move before shorting. Schwab allows me to buy (buy stop) when a price is reached. Waiting for the 21 day Moving average passing through the 63 day MA.

http://www.google.com/finance?chdnp=...YSE:TZA&ntsp=0

[Kadriana]

Re: From:S&P- S&P is too high!

Thanks, Smash, I needed that. I put S&P 500 shorts in place a few weeks ago but it's been making me nervous the way this rally won't let up. I needed a little "affirmation".

It is hard to watch it go up so much when the majority of your holdings are cash.

[jtabeb]

Re: From:S&P- S&P is too high!

Thanks, Smash, I needed that. I put S&P 500 shorts in place a few weeks ago but it's been making me nervous the way this rally won't let up. I needed a little "affirmation".

If we are really stepping into the realm of hyper-inflation (Hint, I think we are), this type of traditional diagnostic about market valuation will go out the window (and stay there) till the hyper inflation has run it's course.

It's like the German Wiemar official who stated that the price of clothes were far too high given the terrible economic fundamentals at the time. He stated that he would wait until the prices were realistically based on supply and demand fundamentals.

In the ensuing 3 years the price of clothes (a shirt, I believe he was referring to) doubled, then tripled, then went up by a factor of 100,000.

So word to the wise, all bets are off when it comes to potential currency collapse. The market behavior as of late is pricing in one of TWO things: A rapid turn around economically, OR a currency collapse.

I would short If the pricing was ONLY based on an economic turn around, But I would be LONG if currency collapse was on the table. IT is, and is priced in, so JUST be mindful of what you are REALLY shorting. That is, YOU ARE SHORTING THE POSSIBLITY OF A CURRENCY COLLAPSE ( Your short implies that you don't think the currency will become unstable, while many, including myself, think that it will)!

You could be correct about no turn around in economic activity, but if you are wrong about a possible currency collapse, then you can STILL LOOSE YOUR ASS!

Please be careful.

V/R

JT

[jheis]

Re: From:S&P- S&P is too high!

A better investment in the event of a currency collapse is precious metals and precious metals stocks.

[Shakespear]

Re: From:S&P- S&P is too high!

Thanks Jtabeb, that is a nice explanation of the possibilities

This definitely is unknown territory.

[vinoveri]

Re: From:S&P- S&P is too high!

If we are really stepping into the realm of hyper-inflation (Hint, I think we are), this type of traditional diagnostic about market valuation will go out the window (and stay there) till the hyper inflation has run it's course.

It's like the German Wiemar official who stated that the price of clothes were far too high given the terrible economic fundamentals at the time. He stated that he would wait until the prices were realistically based on supply and demand fundamentals.

In the ensuing 3 years the price of clothes (a shirt, I believe he was referring to) doubled, then tripled, then went up by a factor of 100,000.

So word to the wise, all bets are off when it comes to potential currency collapse. The market behavior as of late is pricing in one of TWO things: A rapid turn around economically, OR a currency collapse.

I would short If the pricing was ONLY based on an economic turn around, But I would be LONG if currency collapse was on the table. IT is, and is priced in, so JUST be mindful of what you are REALLY shorting. That is, YOU ARE SHORTING THE POSSIBLITY OF A CURRENCY COLLAPSE ( Your short implies that you don't think the currency will become unstable, while many, including myself, think that it will)!

You could be correct about no turn around in economic activity, but if you are wrong about a possible currency collapse, then you can STILL LOOSE YOUR ASS!

Please be careful.

V/R

JT

Points well taken and good advice.

Even without a currency collapse or hyperinflation, but 'merely' the expectation of a multi-year double digit inflation as EJ has described (e.g., 100% over 5 years) may be enough to propel paper assets higher.

The Dow may drive higher, double, even triple, and everyone's feeling wealthy, and hardly notice that gas and milk are $10-15/gallon a few years from now (as the MSM explains that the price increases in commodities are due to "growing China deman", "peak oil", and all the other nonsense misdirecting from the truth of money printing and weak dollar.

[*T*]

Re: From:S&P- S&P is too high!

Thanks, Smash, I needed that. I put S&P 500 shorts in place a few weeks ago but it's been making me nervous the way this rally won't let up. I needed a little "affirmation".

Just because it is heinously mispriced doesn't mean it will go down soon...
It has the feeling of flight into real goods... gold up, stocks up, dollar down.

[Quincy K]

Re: From:S&P- S&P is too high!

If we are really stepping into the realm of hyper-inflation (Hint, I think we are), this type of traditional diagnostic about market valuation will go out the window (and stay there) till the hyper inflation has run it's course.

It's like the German Wiemar official who stated that the price of clothes were far too high given the terrible economic fundamentals at the time. He stated that he would wait until the prices were realistically based on supply and demand fundamentals.

In the ensuing 3 years the price of clothes (a shirt, I believe he was referring to) doubled, then tripled, then went up by a factor of 100,000.

So word to the wise, all bets are off when it comes to potential currency collapse. The market behavior as of late is pricing in one of TWO things: A rapid turn around economically, OR a currency collapse.

I would short If the pricing was ONLY based on an economic turn around, But I would be LONG if currency collapse was on the table. IT is, and is priced in, so JUST be mindful of what you are REALLY shorting. That is, YOU ARE SHORTING THE POSSIBLITY OF A CURRENCY COLLAPSE ( Your short implies that you don't think the currency will become unstable, while many, including myself, think that it will)!

You could be correct about no turn around in economic activity, but if you are wrong about a possible currency collapse, then you can STILL LOOSE YOUR ASS!

Please be careful.

V/R

JT

Well said. it is quite possible that we have already seen the worse of the KA and are now entering the POOM.

[charliebrown]

Re: From:S&P- S&P is too high!

i agree,
In July of this year I started buying stocks, only small amounts and they are stopped out. Its not that I see the economy recovering, it's that if we have a currency crisis, their nominal value may go up. I'n theory I'm an owner of a plant and equipment. For this same reason, I am scaling back on shorts/and reverse etfs. Perhaps if there is some currency crash stocks may head south quickly, then bounce back up when, people realize their paper money is losing value fast.

I only hope we have a rebound in the $US. I dont have enough pm's and energy, foreign cur, and tips. Only 17%. the rest is in cash I'm as nervous as a long tail cat in a room full of rocking chairs.

Oh and P.S. I keep my own running p/e using vanguar's p.e. on the S&P 500 fund as a proxy, maybe I should switch, but when I started my own modeling that was what was easily available anyway the most recent data is for aug. and the ttm p.e. their is 22.6. Still very high considering we are in a recession. I don't know why there is a descrepency between vanguard and standard and poor's maybe it is operating vs. reported. I will look into this and perhaps change to the s&p data set. I have five years of vangurard data and average ttm p.e. is 17. The lowest p/e is 11 on nov of 2008. The 22.6 is the highest p/e I have recorded.

Now one point that does not support the high inflation rate is corporate bond prices. If stocks can be used as an inflation hedge, bonds certainly can't, With a bond I don't own anything except a revenue stream. If currency crashes and inflation takes off I get paid back in depreciated dollars. Using vanguard again the int term investment grade bond fund yield is 4.35. This is the lowest yield in five years as well. Maybe it is the sheeple thinking I can get 4.35% return compared to 0% in my savings account, or 2% on treasuries. I'm sure I'm preaching to the choir, that if inflation kicks in at even a modest 5% and the default rate kicks up to several percent, that 4.35% is not going to much protection.

[pianodoctor]

Re: From:S&P- S&P is too high!

I just found the following article that pertains to why the 140 P/E ratio is not as alarming as it appears. It was written a few months ago when the P/E was- get this- 1800.

http://www.marketwatch.com/story/pe-...-season-begins

"July 7, 2009, 12:03 a.m. EDT · Recommend · Post:
A price-earnings ratio of 1800-to-1?

Commentary: Stock market's P/E ratio remains worrisomely high

By Mark Hulbert, MarketWatch

ANNANDALE, Va. (MarketWatch) -- How does the stock market's current P/E ratio stack up to historical norms?

That's an important question anytime, of course, but especially now with earnings officially beginning this week.

Unfortunately, the picture that emerges is not pretty: In order for the stock market's P/E ratio just to come back down to its long-term average, earnings will have to be a whole lot better than they are currently expected to be.

To be sure, there are many different ways in which this ratio can be calculated. One can focus on earnings over the trailing 12 months, for example, or on analyst estimates of what they will be over the coming 12 months. One also can choose to focus on the earnings as actually reported by the companies, or on what's known as operating earnings.

For this column I chose to focus on as reported earnings over the trailing 12 months. One virtue of relying on this definition is that it preserves comparability with the most comprehensive database I know of for the stock market's historical P/E ratios -- the one maintained by Yale University's Robert Shiller. It dates back to 1871. (Click here to access that database.)

Calculated in this way, the P/E ratio for the S&P 500 index /quotes/comstock/21z!i1:in\x (SPX 1,054, -0.69, -0.07%) currently is greater than 1,800 to 1.

Yes, you read that right.

And the ratio could soon become even larger. That's because trailing 12-month earnings for the S&P 500 are likely to drop below zero later this year. In fact, Howard Silverblatt, S&P's senior index analyst, forecasts that the earnings per share (EPS) for the S&P 500 in the 12 months ending this coming Sept. 30 will be negative $2.08.

Of course, as the denominator of the P/E ratio gets smaller and smaller, the value of the ratio gets larger and larger.

All this may incline you to dismiss the P/E ratio as having lost all relevance to current debates about market valuation. And you'd have a point: The S&P 500's EPS loss of $23.25 in the fourth quarter of 2008 was in many ways an anomaly, and it won't be until next year that this loss doesn't completely dominate the P/E ratio.

Nevertheless, the current sky-high P/E ratio does serve to remind us of just how unique recent historical experience has been. Prior to recent experience, the highest the P/E ratio ever got in the previous 140 years was 46.7, according to Shiller's data.

Furthermore, other ways of calculating the P/E ratio also show stocks to be at least fairly valued right now, if not somewhat overvalued.

Consider, for example, a modified P/E ratio that Shiller calculates. One of its virtues is that it overcomes the problems associated with artificially depressed earnings at bear market lows. The denominator of this modified ratio is average inflation-adjusted earnings over the trailing 10 years. Call this modified ratio "PE10."

Using Shiller's data, I estimate that the current "PE10" stands at around 16.4, versus the long-term average over the last 140 years of 16.3 and a median of 15.7.

The bottom line? Even dismissing the market's current sky-high P/E ratio as a fluke, it's hard to argue that stocks are cheap.

Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980. "

[*T*]

Re: From:S&P- S&P is too high!

If we are really stepping into the realm of hyper-inflation (Hint, I think we are), this type of traditional diagnostic about market valuation will go out the window (and stay there) till the hyper inflation has run it's course.

It's like the German Wiemar official who stated that the price of clothes were far too high given the terrible economic fundamentals at the time. He stated that he would wait until the prices were realistically based on supply and demand fundamentals.

In the ensuing 3 years the price of clothes (a shirt, I believe he was referring to) doubled, then tripled, then went up by a factor of 100,000.

So word to the wise, all bets are off when it comes to potential currency collapse. The market behavior as of late is pricing in one of TWO things: A rapid turn around economically, OR a currency collapse.

I would short If the pricing was ONLY based on an economic turn around, But I would be LONG if currency collapse was on the table. IT is, and is priced in, so JUST be mindful of what you are REALLY shorting. That is, YOU ARE SHORTING THE POSSIBLITY OF A CURRENCY COLLAPSE ( Your short implies that you don't think the currency will become unstable, while many, including myself, think that it will)!

You could be correct about no turn around in economic activity, but if you are wrong about a possible currency collapse, then you can STILL LOOSE YOUR ASS!

Please be careful.

V/R

JT

Oh God. Maybe Lukester was right?!