Does anyone know P/E levels for SP500 at the following times? March 2000 Oct 2002 Oct 2007 Dec 2007 Also, any opinions as to usefullness of P/E levels for long term position timing?
BJL,Thanks very much. That is an impressive set of data. Once I go thru it I'll answer my own question and post results...
historical hi-lo avg PE is 14-30... in 2000 sp500 was 31 bear markets usually come when it approaches 30... right now the PE is around 15 or less...which in my opinion as i have stated many times b4 is not where a bear market starts nor has a bear amrket ever started when the pe has been this low... So,personally i think this is a vicious correction not a bear market.There may be some massive selling yet due to the financial mess but there will be a mother f'er of a buy opportunity/bounce when that washes out.
with the financials being 20-25% of the s&p, who knows whst the real pe of the mkt is. If any of the insurer's go bk, it just gets worse. Not saying it's going to happen.....just laying out worse case scenario. All that being said we are due a bounce at some point next week, it will have a better chance sticking if it happens interday with the spooz down bigtime (30-40ish should do it!)
You sir are falling into a trap. That trap is the "value trap". P/Es can go lower and sometimes there can be no P/E at all. Just look at the price. Which way is it going? We have not been this low since 2006. That is alarming and I say it still has a ways to go down.
Bigcharts.com can show the p/e ratio on the stock price graph. I find price often leads earnings or p/e ratio changes.
so profitable companies that are trading near cash and book value that have little to no debt are value traps? you have fallen into the trap of buying the hype that the market is dead and that valuations mean nothing for profitable companies.
>>>>Another way to look at this is prices haven't been this cheap since 2006.. THen look at what stocks did in 06 and 07. Part of paranoia is that the severity of the credit mkt timbomb is shrouded in mystery. No one seems to really know how it will unwind and what kind damage we will see. However, it seems to me that both extreme optimism and pessimism are almost always overblown...
i think we are getting close to knowing how bad the credit situation will get. the market has already priced in a ton and firms are finally starting to value their CDOs closer to their real value or even to a value of ZERO. there will still be more blow ups and bankruptcies to come but with that we will also discover the companies that are still solid and poised to takeover the new markets with less competition. an intriguing play on this sort of thing now is bershire hathaway and their entry into the mortgage reinsurance business. certainly you have to give it more time but it seems like they will be ready to clean up when all those companies go bankrupt.