Registered: Apr 2007
09-22-12 10:42 PM
Wesis say FCliff will not happen any time soon Gov’t keep pushing in further into the future. Now the market is being pushed higher by QE3 and Josh brown says the FED wants you to get rich. Fundaments not important the fed and ECU more important.
Sept 2011 to sept 2012 The DOW is up 11 of last 12 months not happen in about 50 years.
When the index was at its apex2007 , trailing twelve month earnings were $89.35 per share, producing a P/E ratio of 17.5. With trailing earnings today 2012 at $98.30 per share, the market is trading at an earnings multiple of 14.8. If the S&P 500 were trading at the same earnings multiple as at its 2007 peak, the index would be at 1722, roughly 18% higher than the current level despite trailing earnings only 0.5% from their all-time nominal peak. Some might be quick to point out that too high of a multiple was placed on the market at its peak, especially given that in hindsight we know that the market was overvalued given the looming risks. At a 17.5 P/E multiple, the market multiple at its peak was just a turn higher than the long-run average multiple of 16.5x. Of course, investors do not buy stocks for trailing earnings, markets are inherently forward looking. Is today's earnings multiple discount at 11% to the historical average fair?
Questions linger. Can accommodative monetary policy in the United States offset uncertainty over fiscal policy given our consistent trillion dollar deficits, growing entitlement obligations, and lack of political will to address these issues? Will foreigners who own half of our public Treasury debt continue to be willing to finance our largesse? Can economic and fiscal integration occur in the Eurozone with such disparate national economies and cultures?