Historical P/E's

[dsq]

a couple of sp500 pe charts

http://www.lowrisk.com/sp500pe.htm


http://bespokeinvest.typepad.com/.s...s/uncategorized/2007/09/26/historicalpe95.png

http://bespokeinvest.typepad.com/bespoke/2007/09/historical-pe-r.html

 

[Trayo]

Quote from dsq:

a couple of sp500 pe charts

Thanks much for those great charts. Answers my original question nicely.

Glad P/E is 15 today instead of 35.

Interesting that PE @ 5/92, during the throes of that recession was 25.

The virtual printing presses down at the Fed are running on turbodrive. All this money being created has to go somewhere, and everyone hates real estate. So where's it going to go?

 

[alex7]

 

[piezoe]

Quote from Trayo:

Quote from dsq:

a couple of sp500 pe charts

Thanks much for those great charts. Answers my original question nicely.

Glad P/E is 15 today instead of 35.

Interesting that PE @ 5/92, during the throes of that recession was 25.

The virtual printing presses down at the Fed are running on turbodrive. All this money being created has to go somewhere, and everyone hates real estate. So where's it going to go?

1. It is an ill wind that does not blow some good. As an investment opportunity, it would seem real estate is looking better, and the next 12-18 months should bring excellent opportunity for real estate investors in a low interest rate environment. I own real estate as part of my overall investment portfolio, in December I added more, and expect to add more still in coming months as opportunities
continue to improve.

2. The historical average P/E has been close to 15 over the last century, indicating that the P/E ratio has rested for far longer periods near 15 or below than it has at levels well above that.

3. "In general Tax Cuts don't pay for themselves." -- Ben Bernanke, chairman Federal Reserve. (I heard him utter this just minutes ago on CSpan)

4. Low taxes are highly beneficial, but only when coupled with lowered federal spending. (paraphrasing Bernanke)

5. Tax cuts without coupled spending decreases amount to forcing citizens to borrow money that they must pay back at interest either directly or via inflation. The result, in the long run, is lowered living standards.

6. If you want to cut spending, the first place to look is in those sectors where spending is greatest relative to its net return to the public, i.e., military spending. The last place to look should be in sectors that represent investment in infrastructure and future productivity and offer higher rates of return in terms of improving standards of living and public welfare, i.e., education, technology, transportation, etc.

 

[Trayo]

Another interesting chart.

End of 2007:
Earnings per share at highest level since at least 1989.
End of 2007:
P/E ratio at lowest level since 1996.

P/E ratio downtrend reversed to uptrend late 2006, right around the time real estate starting turning ugly. Perhaps stocks started looking no so bad after all.

Real estate is getting uglier by the day, and the bottom is far from over.

CDs and MM funds don't even keep up with true inflation.

Where is all the cash going to go?

 

[piezoe]

Though P/E ratios are at the lowest levels since 1996, they are nevertheless near long term average levels.

Though it is valid to look at P/E ratios, because both numerator and denominator are inflated by the same percent, it is invalid to look at earnings alone before correction for inflation. After correction, it is clear that earnings have not increased nearly so much as it might seem. When politicians speak of growth in the economy they seldom are referring to real growth as corrected for inflation.

Grapes should be compared with grapes, not with grapefruit.

 

[scriabinop23]

Quote from Trayo:

Where is all the cash going to go?

Treasuries, driving the yields down even more.