Mr. Bull, We've Had Enough with Your BS. You're Fired!

[Seaweed]

Here is a sample chart on SPX P/E levels :

https://www.multpl.com/s-p-500-pe-ratio

Nothing about this chart suggests we are at some incredible valuation out of the norm. Yet many of you post like we are. I guess if you think 12 is normal and that we are at 50, you'd expect a crash, sure. In reality, two recent years ( I believe it was 2016 and 2017 ) were two of the most impressive earnings growth in recent history, which pulled the P/E to higher part of the normal range early in 2018. While markets have gone up since January 2018, it's not by a huge amount at all. The perception however is out there that they have. One could argue that the trade wars killed earnings growth, but the market is now pricing in an end to those wars and if the earnings growth returns it's entirely justified on a fundamentals basis.

I always go back to the real numbers because traders online and the press are notoriously wrong about these things ( too much bias really ).

See, that's exactly my point. You're saying that it's crazy for some people to say a PE ratio of 50 will cause a crash since they are used to a number of 12. All those numbers were based on money actually having a value, and interest rates being "normal". These days, money have no value, interest rates are near zero, or can become negative, so any idea of what is normal is really out the window. If the business community can accept 50, fine. If the business community can throw billions of dollars at companies that burn money, fine.

None of these numbers matter anymore so it doesn't really matter what they are or what someone things of them since it can be spinned in any sort of direction.

 

[Nine_Ender]

See, that's exactly my point. You're saying that it's crazy for some people to say a PE ratio of 50 will cause a crash since they are used to a number of 12. All those numbers were based on money actually having a value, and interest rates being "normal". These days, money have no value, interest rates are near zero, or can become negative, so any idea of what is normal is really out the window. If the business community can accept 50, fine. If the business community can throw billions of dollars at companies that burn money, fine.

None of these numbers matter anymore so it doesn't really matter what they are or what someone things of them since it can be spinned in any sort of direction.

Come back to reality; the chart says 24.7 is the current P/E and we haven't been at 12 since the mid 1980s. So if anybody is still "used" to 12 they may still have a Commodore 64 on their desk.

 

[Seaweed]

Come back to reality; the chart says 24.7 is the current P/E and we haven't been at 12 since the mid 1980s. So if anybody is still "used" to 12 they may still have a Commodore 64 on their desk.

But from the chart, both mean and median are way below your current 24 at 15 and 14. In fact, only 3 times has it gone above 25. And although the 2 recent ones have stayed above this number for many months, they have both come crashing down. So if anything, your chart shows that 24 really isn't sustainable.

 

[Nine_Ender]

But from the chart, both mean and median are way below your current 24 at 15 and 14. In fact, only 3 times has it gone above 25. And although the 2 recent ones have stayed above this number for many months, they have both come crashing down. So if anything, your chart shows that 24 really isn't sustainable.

Your analysis of that chart is terrible. Throw out anything before 1990 it's irrelevant. Mean and median aren't 14 or 15 in the modern era. Why on earth do you care what the P/E of the SPX was when interest rates were like 10-20%

 

[Seaweed]

Your analysis of that chart is terrible. Throw out anything before 1990 it's irrelevant. Mean and median aren't 14 or 15 in the modern era. Why on earth do you care what the P/E of the SPX was when interest rates were like 10-20%

It's all irrelevant. The earnings part doesn't matter anymore so the whole metric is useless.

 

[schizo]

From this day on, I will keep track of SPX using today's high of 3294 as the baseline.

01/14 : -11 (-0.34%)

Number of days since and % change from 3294:

Day 3 : +0.68%

 

[Overnight]

Number of days since and % change from 3294:

Day 3 : +0.68%

You should also, for the heck of it, post the closing price with the percentage change. For transparency purposes.

 

[schizo]

You should also, for the heck of it, post the closing price with the percentage change. For transparency purposes.

Fair enough, but I'm not too concerned because charts are pretty much accessible everywhere now. However, I'm sticking to the "% change" to show how many days would elapse before it drops 10%. As we all know, 10% drop is the precursor to a recession.

Hope that makes sense.

 

[Overnight]

...As we all know, 10% drop is the precursor to a recession.

Hope that makes sense.

We've had 3-4 of those in the past 2 years. Where's the recession?

 

[schizo]

We've had 3-4 of those in the past 2 years. Where's the recession?

Did we? I never noticed.

Anyway, this is all for fun. Don't attach too much meaning. For the time being, trade well and live well.