current PE ratios - one says buy, the other sell....

JackRab · Aug 16, 2017

Interesting comparison between normal PE (18.8) and Shiller PE (30.15).

http://www.marketwatch.com/story/da...re-near-an-overheated-stock-market-2017-08-15

I think at the moment the normal PE is a better representation of conditions, since Shiller's PE looks at avg earnings of the past 10 years... that includes GFC, which obviously was a major hit on earnings, so Shiller's should actually get better in the next few years.

EDIT. Thread title is a bit misleading. Maybe it doesn't exactly say buy, but it's not overheated.

beerntrading · Aug 16, 2017

I made the same argument (embarrassingly at the beginning of the NK non issue..and because of it) but using forward P/E as the basis for comparison. A black swan could change that in a day, but I foresee my bullishness continuing through 2018 and into 2019. This market is nothing. On an exponential graph, we're on target for natural (demographic) growth, no bubble...

JackRab · Aug 16, 2017

How do you use fwd PE, do you look at expected earnings? How far ahead?

beerntrading · Aug 17, 2017

JackRab said:
How do you use fwd PE, do you look at expected earnings? How far ahead?

I use the 1 year forward earnings estimates for my P/E into earnings. I use that figure as the basis for options trades in the presumption of settlement a the price I expect (on the day prior to release).

With the S&P, I just look at the aggregate P/E, and aggregate forward P/E. 12 months only, both ways.

12 months forward against current P/E (with appropriate corrections) will provide the price into earnings. 12 months trailing will provide the ratio to apply to the forward. I have three views of an earnings release: optimistic, pessimistic, and neutral...and the basis for the pivot is forward earnings against trailing P/E. That number let's you call the pivot on expectations vs surprise on a per share basis...call peaks / troughs / liquidity in the ETH.

For a direct answer, I apply trailing P/E (12 month) to the 12 month forward P/E. That's the earnings pivot point. But for my purposes, I use it to judge the price into earnings...if you read my journal right now, you'll see this is the basis for the long side of my diagonal spread strategy (usually I buy the strike I expect to be ATM on release, sometimes one lower on low volatility stocks...CSCO is an open example right now)

DeltaRisk · Aug 17, 2017

JackRab said:
Interesting comparison between normal PE (18.8) and Shiller PE (30.15).

http://www.marketwatch.com/story/da...re-near-an-overheated-stock-market-2017-08-15

I think at the moment the normal PE is a better representation of conditions, since Shiller's PE looks at avg earnings of the past 10 years... that includes GFC, which obviously was a major hit on earnings, so Shiller's should actually get better in the next few years.

EDIT. Thread title is a bit misleading. Maybe it doesn't exactly say buy, but it's not overheated.

Clearly by measurement standards, almost every company in the S&P is overvalued.

Fundamentals are only important in productive(non-tech) private companies.
I can't stress that enough.
Publicly traded companies are fueled by credit creation. Ebb and flow, it's been like this for a hundred years.
I'm not going into a debate about it, just read everything about Richard Werner's writings.

JackRab · Aug 17, 2017

DeltaRisk said:
Clearly by measurement standards, almost every company in the S&P is overvalued.

Fundamentals are only important in productive(non-tech) private companies.
I can't stress that enough.
Publicly traded companies are fueled by credit creation. Ebb and flow, it's been like this for a hundred years.
I'm not going into a debate about it, just read everything about Richard Werner's writings.

You're right... it's got it's flaws.

piezoe · Aug 17, 2017

beerntrading said:
I made the same argument (embarrassingly at the beginning of the NK non issue..and because of it) but using forward P/E as the basis for comparison. A black swan could change that in a day, but I foresee my bullishness continuing through 2018 and into 2019. This market is nothing. On an exponential graph, we're on target for natural (demographic) growth, no bubble...

Starting in 2008-9, a roughly 20 year period of bullishness shouldn't be unexpected. It may take about another 10 years for the Fed to unwind their balance sheet, and bullish conditions would facilitate that process...

DeltaRisk · Aug 17, 2017

piezoe said:
Starting in 2008-9, a roughly 20 year period of bullishness shouldn't be unexpected. It may take about another 10 years for the Fed to unwind their balance sheet, and bullish conditions would facilitate that process...

It's going to be much faster than that.

Having a background in Ecomonics is a foundation for a great investor. I'm not sure why the guys on here will read everything about Tim Sykes but won't even touch a research paper or study up on how Keynesian policy actually works.

ironchef · Aug 17, 2017

DeltaRisk said:
It's going to be much faster than that.

Having a background in Ecomonics is a foundation for a great investor. I'm not sure why the guys on here will read everything about Tim Sykes but won't even touch a research paper or study up on how Keynesian policy actually works.

How do I make money day trading using signals from published Keynesian policy research papers?

DeltaRisk · Aug 17, 2017

ironchef said:
How do I make money day trading using signals from published Keynesian policy research papers?

POMO's got front run. They offered much better returns & expectancy than what is offered with day trading signals.
I'm sure you can use google to figure that out.

Keynesian policy is more geared toward a longer timespan than a day, but it will tell you where stocks are going to go.