http://www.crossingwallstreet.com/archives/2007/04/pe_ratios_are_a.html What are you guys think about it? I believe P/E can't growth forever , so either indexes will stop growth or earnings will growth at higher pace than price (hard to believe)... sorry, What P/E S&P had at October 1987?
Very bullish IMO. Finally more money is flowing into the market (probably from Real Estate which went bust) and is driving up stock prices and expanding PEs. Good buying signal.
I don't know if they're showing the forward PE or the TTM PE, but I'm guessing it's the latter. The TTM P/E was 24 just before the 87 crash, and 33 before the 2000 crash, and its all-time high was ~37 in July 1999. There isn't a correlation between magnitude of a crash and the PE. Also, there have been periods of months & years where the market remains overvalued before it corrects. An example is 1996 to 2000. imo you aren't well served by using the PE to predict a correction or crash
One thing I'd like to add is... I don't think a high PE is a reliable indicator of an imminent crash. But I think a low PE is a reliable indicator that a crash WON'T happen. Unfortunately, where it stands now the SP500's PE is not a useful indicator for anything.