HA....stocks are cheaper than they have been in over 20 years!

Discussion in 'Economics' started by S2007S, Jan 23, 2012.

  1. S2007S


    So they are cheaper now than the last 20 years, is that so. I find these articles hilarious, its like pulling up articles from just a decade ago about analysts predicting dow 100,000 and cisco being the first trillion dollar company.

    "the economic backdrop in terms of the US economy remains stable to positive,"

    Really stable to positive??? hmmmm, let me repeat myself for the millionth time, take away all those free handouts and trillions in QE and there would be no such thing as stable to positive economy. Here we have fools ignoring the fact that the only reason the US economy remains stable to positive is because of the QE and BUBBLE ben bernanke ways of keeping historical low interests rates at 0%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%!!!

    If this economy is improving than why are rates at historical lows, why doesnt BUBBLE ben bernanke increase them to 2 or 3%, oh I forgot the economy cant handle those "high" interest rates, they have become to dependent on 0% interest rates. Thats right...

    Stocks Are Cheaper Than They've Been in Two Decades
    Published: Monday, 23 Jan 2012 | 1:30 PM ET
    Text Size
    By: John Melloy
    Executive Producer, Fast Money & Halftime

    U.S. stocks are trading at their cheapest levels since at least 1990, according to such commonly used valuations as price-to-earnings and price-to-book ratios as well as dividend yield, Bespoke Investment Group says.

    This realization will lift the S&P 500 Index [.SPX 1316.98 1.60 (+0.12%) ] by 11 percent to 1,400 this year or maybe more, according to the research firm’s 2012 outlook report.

    “The S&P 500 is currently trading below its historical average P/E and P/B ratios, and these ratios are also at their lowest levels in the careers of a large percentage of money managers,” wrote strategists Paul Hickey and Justin Walters.

    “While the current level of earnings is by no means guaranteed, the economic backdrop in terms of the US economy remains stable to positive," they added. "There is no denying the fact that the recovery has been tepid, but the manufacturing sector has been a pocket of strength, while the employment picture [cnbc explains] is really beginning to show improvement.”

    The S&P 500 is already on track to reach or exceed this forecast, up more than four percent in 2012. Better-than-expected economic data and an emerging bailout solution in Europe are behind the gains.

    To start 2012, the benchmark had an earnings multiple of 13, the lowest since 1990 and below the 80-year average of 15, according to Bespoke. It would take a move back to 1,484 to get the benchmark back to this long-term mean P/E.

    The price-to-book ratio is 2.05, below the average since the late 1970s of 2.43. To get back to that average P/B, the benchmark would need to increase to 1,491.

    One more valuation—dividend yield—points to above 1,400, argue the two strategists.
    Beyond the money

    “At the end of 2011, the S&P 500 was yielding 13 percent more than the 10-Year US Treasury,” wrote Hickey and Walters. “Outside of the credit crisis, the last time the S&P 500 yielded more than the 10-Year Treasury was before 1960."

    They added: "In order for the dividend yield to get back to its historical average relative to US Treasuries, either the 10-Year yield would have to rise back above 2 percent, the S&P 500 would have to rally to 1,410, or you would have to see some combination of the two.”
  2. its all a con the fed controls with world with the military. You will see once the BRICS denounce use of the dollar WW3 starts they will find a reason.
  3. Oh CRAP!!

    I've got to buy...Buy...BUY!!!!!!! :D

    Hurry before they run out!!!
  4. It's true the S&P is yielding well to the north of Treasuries. Unlike Treasuries, those dividends can be increased.
    It's also true that yours truly, for instance, when he bought and read, for the first time, Security Analysis by Graham & Dodd and read the part about how yields on the S&P had fallen below Treasuries and that this had, in the past, signaled an overvalued market, shook his head and thought "How quaint."
    As in, I never thought I'd see it in my investing lifetime. But here we are. It's something to note carefully and analyze just as carefully, not to make fun of or to jump to conclusions about.
    Unless you're just in this for the fun of it.
  5. That's interesting.

    We have low volume and monthly outflows, very possible the situation could lead to a solid increase in the coming months.
  6. All economic recoveries begin with the assistance of fiscal stimulus and supportive monetary policy.