S&p 500 Pe Ratios Well Above Mean And Median Long-Term Averages;

[Guest_ringledman_*]

Earnings rise at greater rate than stocks rise next 5 years. P/E comes down.

Crash possible but unlikely. Markets will be propped up for at least a few years until previous market peaks reached. Then higher risk of falling as SECULAR bear markets last longer than 11 years typically.

High yield defensives, yielding twice the gilt rate and on P/Es of less than 10 the place to be......

[_w_]

I'm expecting a correction but I'm wrong as often as I'm right.

I think the commodity market will be the most likely source of a serious setback for stocks due to margin compression. That's if China doesn't slowdown too quickly and cause more than the current short term correction in the commodity market.

That business in Aus is also an interesting variable that could have short term repercussions .

[OnlyMe]

Cop a load of this.......

mms://wideawake.gsradio.net/wideawake/010311.mp3

First bit about tax waiver and offshore funds.

Best line yet (on free trade) - "your value, ladies and gentlement is one in 7 billion."

Edited January 5, 2011 by OnlyMe

[Confounded]

http://globaleconomicanalysis.blogspot.com/2011/01/s-500-pe-ratios-well-above-mean-and.html

'Two Key Points

In spite of what most cheerleaders suggest, this is one strenuously overvalued market.

In spite of the crash in 2008 and early 2009, valuations never reached typical bear market trough valuations.

Also another way of valuing stocks and for all those who say stocks are not in a bubble. The only time they have been more expensive than now is 2000 and 1929!

Edited January 5, 2011 by Confounded

[VeryMeanReversion]

I've only got another 2% of stock price rises to go before my triggers mean I sell all my remaining stocks then go into hibernation, waiting for prices to go down (or my cash to become worthless!)

[interestrateripoff]

It's the new paradigm, the charts simply can't cope with this new reality.

Embrace the wealth.

[Guest_ringledman_*]

Finally, I do not believe current earnings statements because banks are still hiding losses off the balance sheets, assets are still not market-to-market, reserves are insufficient to handle upcoming losses, and because various capital-raising efforts required by Basel III have not been implemented.

On that basis, the market (and forward estimates) are both far frothier than the opening chart implies.'

the last highlighted bit is the elephant in the room.I was speaking to a developer the other night.turned an old school into some luxury flats in 2007/8.couldn't sell em.the rent he's getting is barely covering his debts and the bank are being very understanding.....I bet they are,don't want a 7 figure/50% write down.

Please explain to me why ever uber bear on the stockmarket seems to think that the market is only made up of banks and developers?

Every argument goes 'banks and developers hiding lossses = every stock in the world overvalued'.

[indirectapproach]

CNN money tells me the average P/E for the Dow is 15 and for the S&P it's 17.8.

If these numbers are a bit toppy for long term historic averages (14-16 according to the idiots guide), they are nothing like as "overvalued" as they were during the bull run of the 1990's and the run from c. 2003 - the end of 2007.

And who would have wanted to have missed out on those?

[W1zard]

I've only got another 2% of stock price rises to go before my triggers mean I sell all my remaining stocks then go into hibernation, waiting for prices to go down (or my cash to become worthless!)

Do you buy / sell based on the overall market averages rather than the levels of individuals stocks? I will still buy low priced individual issues during high markets such as this because I have found in the past they get less of a haircut than more expensive issues should the correction come.

[interestrateripoff]

Please explain to me why ever uber bear on the stockmarket seems to think that the market is only made up of banks and developers?

Every argument goes 'banks and developers hiding lossses = every stock in the world overvalued'.

If banks make big losses who gets to pick up the tab? The taxpayer.

The taxpayer hasn't got the money the only way to get the money is to borrow it and then increase taxes to cover the debt servicing costs.

If you increase taxes what happens to aggregate demand does it go up or down?

If peoples incomes are being squeezed, there is less money going around the economy, meaning ultimately revenues/profits will go down unless of course QE inflates all our problems away.

Just one reason as to why perhaps stocks are overvalued.

However it could be the belief that the non bank/developer stocks will actually drive forward the economy and make lots of money, therefore the valuation given in the share price is accurate.

[aa3]

I believe stocks are fairly valued in America right now.

There is also the global growth story. Earnings growth potential seems bleak for most stocks in America and Europe, but globally these same companies have decades of opportunity to come. Now a lot of the S&P 500 is more domestic oriented stocks in America, so we could even see a divergence between it and the truly global corporations.

You have to pick stocks though, like Pedro said, BHP billington is a darling stock, but to me it is just so high it doesn't seem like there is any room to go up in value. Or at least not much.

Some ones I like from the American market: I still like Intel.. been long on it for a few years now and it still looks good. HP.. its at a good price right now. AES, and other electric utilites.. they are out of fashion right now. But if you believe long term electric power will still keep growing in America like I do, then they are good.

[The Masked Tulip]

I believe stocks are fairly valued in America right now.

There is also the global growth story. Earnings growth potential seems bleak for most stocks in America and Europe, but globally these same companies have decades of opportunity to come. Now a lot of the S&P 500 is more domestic oriented stocks in America, so we could even see a divergence between it and the truly global corporations.

You have to pick stocks though, like Pedro said, BHP billington is a darling stock, but to me it is just so high it doesn't seem like there is any room to go up in value. Or at least not much.

Some ones I like from the American market: I still like Intel.. been long on it for a few years now and it still looks good. HP.. its at a good price right now. AES, and other electric utilites.. they are out of fashion right now. But if you believe long term electric power will still keep growing in America like I do, then they are good.

NASDAQ looking very frothy IMPO.

[babesagainstmachines]

In my opinion, stocks have just had "The Great Crash and Great Depression", bounced from there, and are about to go into the "Oil price shock" - unless somebody can start making billions of barrels of bio oil from facilities based in the tropical oceans pretty damned quick.

[aa3]

NASDAQ looking very frothy IMPO.

I agree, I love the nasdaq companies they are so profitable its insane.. but it seems to be all priced in and then some.

[interestrateripoff]

In my opinion, stocks have just had "The Great Crash and Great Depression", bounced from there, and are about to go into the "Oil price shock" - unless somebody can start making billions of barrels of bio oil from facilities based in the tropical oceans pretty damned quick.

There is a very large source of free plastic in the Pacific. I'm surprised no one has tried claiming this resource yet.

[aa3]

In my opinion, stocks have just had "The Great Crash and Great Depression", bounced from there, and are about to go into the "Oil price shock" - unless somebody can start making billions of barrels of bio oil from facilities based in the tropical oceans pretty damned quick.

Things look extremely bullish for oil. The demand growth globally is so strong they will probably need to increase production by 20 million barrels over the next 10 years, just to keep the supply/demand ratio the same as now.

[indirectapproach]

To say BLT is "high" when its P/E is c. half that of XTA and c. a third of AAL and less than a third of LMI seems misplaced to me.

RIO does look slightly better value and approaching its 4400 resistance level it looks like there may be a cheeky 4% on offer there, were it not for the stamp duty. Pity that.

[VeryMeanReversion]

Do you buy / sell based on the overall market averages rather than the levels of individuals stocks? I will still buy low priced individual issues during high markets such as this because I have found in the past they get less of a haircut than more expensive issues should the correction come.

I now just have funds in a pension and when I see something I like at a multi-year low, I buy, then set a price that I would like to sell it at and wait. It's very boring. Since I don't have inside information, I don't feel like trading individual stocks. I've seen enough people with inside info make money to know that the odds aren't on my side.

Anyway, don't listen to me, although I sold FTSE-100 a few months before the crash and correctly timed two of the bounces on the way down, I then sold up when it went 3600->4100 and missed the recent boom. I can see when a crash is coming but I can't see when a boom is coming.

[aa3]

I woudl agree that it could well be next big bubble,but timing is everything.having said that,there have been several cheap entry opporunities over the last few years.

and there may yet be another one or two.

Good point.. I made a lot of money the last time it dipped down so hard. I will be watching for another fall.

[aa3]

I now just have funds in a pension and when I see something I like at a multi-year low, I buy, then set a price that I would like to sell it at and wait. It's very boring. Since I don't have inside information, I don't feel like trading individual stocks. I've seen enough people with inside info make money to know that the odds aren't on my side.

Anyway, don't listen to me, although I sold FTSE-100 a few months before the crash and correctly timed two of the bounces on the way down, I then sold up when it went 3600->4100 and missed the recent boom. I can see when a crash is coming but I can't see when a boom is coming.

Key thing your doing that most never do is taking profits. Well and waiting for multi-year lows.

[porca misèria]

I believe stocks are fairly valued in America right now.

Seems plausible.

Note that it really is different this time: we've never had such rapid debasement of a developed-world currency, so the $ has blurred as a measure and every asset price is distorted and lagged.

Unless perhaps you go back to Weimar ...

I still like Intel.. been long on it for a few years now and it still looks good.

Why Intel? They're ex-growth, stock price in declined for ten years and struggling to get any kind of foothold in today's growth markets.

(/me is long ARM, sitting on a five-bagger that is admittedly frothy but also at the heart of the biggest growth story since Microsoft in the 1980s)