S&P 500 Over Priced. PE Ratio is Now at 129

W

WallStWhizKid

http://www.mybudget360.com/sp-500-o...at-129-the-most-over-hyped-market-rally-ever/

<a href="http://www.mybudget360.com/wp-content/uploads/2009/08/snp-500-pe-ratio.gif" target="_blank"><img class="alignnone size-full wp-image-1116" title="snp 500 pe ratio" src="http://www.mybudget360.com/wp-content/uploads/2009/08/snp-500-pe-ratio.gif" alt="snp 500 pe ratio" width="454" height="340" /></a></strong></p>
<p>Source: <a href="http://www.chartoftheday.com/Free_Chart_of_the_Day.htm" target="_blank">Chart of the Day</a></p>
 
This is a silly way of interpreting PE. This is looking at actual earning which are irrelevant. I don't buy a stock to participate is its earnings from last year. Whomever owned it at that time participates in trailing earnings. I don't care what the company I own made last year. What will it make next year? That is the metric of interest. Forward looking PE is a much more valuable metric.

The article does go on to point to forward PE of 70, which is rich, but normalization won't occur overnight. I agree the market has a boatload of issues to face going forward, but arguing using pe based on trailing earning is a bad metric and evern more so during a recession.
 
Markets do not need to be rational.

Humans are not rational. That is why the economic theories are largely flawed.

Don't fight the tape. S&P 500, DJIA, Russell 2000s and Nasdaq are all at highs.
 
Quote from MandelbrotSet:

There is absolutely nothing sane or rationale about this market.

It's a Tulip Index if ever there was one.
More...

It's a tulip index that should have poped back in 2000. The pain continues...
 
Quote from monty21:

Markets do not need to be rational.

Humans are not rational. That is why the economic theories are largely flawed.

Don't fight the tape. S&P 500, DJIA, Russell 2000s and Nasdaq are all at highs.
More...

The behavior of irrational humans is how we make money in the markets. We try to be a step ahead of the stampede either way, and that's not that hard to do.

But...

Collusion between the fed/treasury and the big banks - that's the real issue here. It's one thing to take advantage of irrational euphoria or doom, and another thing trying to anticipate what the gov't will do and when it will do it.
 
The Fed has printed and the Treasury spent literally trillions of dollars over the past 12 months. With this kind of printed money floating around, there is no reason why the DJIA can't be at 15K by years end. It doesn't mean anything because the dollar is essentially worthless at this point, but its crazy to short the market in this environment.

A close analogy would be the end of 99 when Greenspan flooded the world w/money because of Y2K worries. Nazz was up 50% in a period of months, only to crash once the spigot was turned off.

If you want to fade this rally, wait until the spigot gets turned off. You'll have plenty of time.
 
Quote from covered_call:

This is a silly way of interpreting PE. This is looking at actual earning which are irrelevant. I don't buy a stock to participate is its earnings from last year. Whomever owned it at that time participates in trailing earnings. I don't care what the company I own made last year. What will it make next year? That is the metric of interest. Forward looking PE is a much more valuable metric.

The article does go on to point to forward PE of 70, which is rich, but normalization won't occur overnight. I agree the market has a boatload of issues to face going forward, but arguing using pe based on trailing earning is a bad metric and evern more so during a recession.
More...

+1
 
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