Well I agree we are on the low end of the interest rate super-cycle, I can't help to think how dangerous that comment is though.

For example, rates could go down by 10% per year for the next two years. Today, 5-July-2016, we hit a new low on the 10-year, 1.367%.

July-2016: 1.367%

July-2017: 1.23%

July-2018: 1.107%

Let's see if it goes any lower.

]]>Well I agree we are on the low end of the interest rate super-cycle, I can't help to think how dangerous that comment is though.

For example, rates could go down by 10% per year for the next two years. Today, 5-July-2016, we hit a new low on the 10-year, 1.367%.

July-2016: 1.367%

July-2017: 1.23%

July-2018: 1.107%

Let's see if it goes any lower.

]]>I had previously written an article (link) that spelled out how the S&P 500 could be down -18% for the year. This article generated some great comments including that the price of the S&P 500 in December is forward looking, not backward looking. Below are my comments and calculations using forward P/E ratios.

**S&P 500 for 2015**

According to S&P Dow Jones Indices, the S&P 500 finished the year down -0.73%.

The Vanguard S&P 500 Index Fund (VOO) closed at $188.40 on Dec. 31, 2014. On Dec. 31, 2015, it closed at $186.93, down -0.78% (0.73% plus expense ratio).

If you include dividends of $3.931, the total return for the year was up +1.3% .

S&P Dow Jones Indices have not released to the pubic the EPS for Q3 2015 (the last quarter in the trailing four-quarter period) as of yet.

The trailing three quarters (Q4 2014 + Q1 2015 + Q2 2015) had a EPS of $67.44, down -16% from $78.49 in the same three quarters the previous year.

Q2 2015 came in at $22.80 as compared to my best guess estimate of $23.42. Sales was $281.35 versus my best guess estimate of $297.71. Profit margin was 8.1%.

**Revising Estimates with Forward P/E Ratios**

In regard to the comments that the market is forward looking and I should not use a multiple on trailing four-quarter EPS, let's conduct a little exercise.

On Dec. 31, 2014, the S&P 500 index closed at $2,058.90, with a trailing four-quarter EPS of $105.96. Since the market is forward looking, what EPS for the S&P 500 was the market assuming?

Using a PEG Ratio = 1 (multiple equal to EPS growth rate), the market assumed an EPS of $123.61, a +16.7% growth. This implies a forward P/E of 16.7.

Using a PEG Ratio = 1.5 (multiple equal to 50% greater than the EPS growth rate), the market assumed an EPS of $118.31, a +11.6% growth. This implies a forward P/E of 17.4.

Using a PEG Ratio = 2.0 (multiple equal to 100% greater than the EPS growth rate), the market assumed an EPS of $115.41, a +8.9% growth. This implies a forward P/E of 17.8.

Seems like at the end of 2014, the market was overpriced on a forward P/E basis given the actual negative EPS growth rate.

**What About for 2016?**

Let's assume a flat Q3 2015 EPS of $27.47, giving a total EPS of $22.83 + $21.81 + $22.80 + $27.47(est.) = $94.91, down -10.4% from last year. With the S&P 500 closing at $2,034.94, what are investors assuming for EPS growth?

Using a PEG Ratio = 1 (multiple equal to EPS growth rate), the market is assuming an EPS of $112.20, a growth of +18.2%. This implies a forward P/E of 18.2.

Using a PEG Ratio = 1.5 (multiple equal to 50% greater than the EPS growth rate), the market assumed an EPS of $107, a growth of +12.7%. This implies a forward P/E of 19.1.

Using a PEG Ratio = 2.0 (multiple equal to 100% greater than the EPS growth rate), the market assumed an EPS of $104.20, a growth of +9.8%. This implies a forward P/E of 19.6.

What is a reasonable price for the S&P 500? Well, if you assume a relatively flat EPS for next year of $95 and a forward P/E of 15, it yields a price of $1,425, which is down 30% from current levels. Even if EPS gets back to 2014 levels of $105.96 and a forward P/E of 15, it yields an S&P 500 price of $1,590, down -22%.

]]>I had previously written an article (link) that spelled out how the S&P 500 could be down -18% for the year. This article generated some great comments including that the price of the S&P 500 in December is forward looking, not backward looking. Below are my comments and calculations using forward P/E ratios.

**S&P 500 for 2015**

According to S&P Dow Jones Indices, the S&P 500 finished the year down -0.73%.

The Vanguard S&P 500 Index Fund (VOO) closed at $188.40 on Dec. 31, 2014. On Dec. 31, 2015, it closed at $186.93, down -0.78% (0.73% plus expense ratio).

If you include dividends of $3.931, the total return for the year was up +1.3% .

S&P Dow Jones Indices have not released to the pubic the EPS for Q3 2015 (the last quarter in the trailing four-quarter period) as of yet.

The trailing three quarters (Q4 2014 + Q1 2015 + Q2 2015) had a EPS of $67.44, down -16% from $78.49 in the same three quarters the previous year.

Q2 2015 came in at $22.80 as compared to my best guess estimate of $23.42. Sales was $281.35 versus my best guess estimate of $297.71. Profit margin was 8.1%.

**Revising Estimates with Forward P/E Ratios**

In regard to the comments that the market is forward looking and I should not use a multiple on trailing four-quarter EPS, let's conduct a little exercise.

On Dec. 31, 2014, the S&P 500 index closed at $2,058.90, with a trailing four-quarter EPS of $105.96. Since the market is forward looking, what EPS for the S&P 500 was the market assuming?

Using a PEG Ratio = 1 (multiple equal to EPS growth rate), the market assumed an EPS of $123.61, a +16.7% growth. This implies a forward P/E of 16.7.

Using a PEG Ratio = 1.5 (multiple equal to 50% greater than the EPS growth rate), the market assumed an EPS of $118.31, a +11.6% growth. This implies a forward P/E of 17.4.

Using a PEG Ratio = 2.0 (multiple equal to 100% greater than the EPS growth rate), the market assumed an EPS of $115.41, a +8.9% growth. This implies a forward P/E of 17.8.

Seems like at the end of 2014, the market was overpriced on a forward P/E basis given the actual negative EPS growth rate.

**What About for 2016?**

Let's assume a flat Q3 2015 EPS of $27.47, giving a total EPS of $22.83 + $21.81 + $22.80 + $27.47(est.) = $94.91, down -10.4% from last year. With the S&P 500 closing at $2,034.94, what are investors assuming for EPS growth?

Using a PEG Ratio = 1 (multiple equal to EPS growth rate), the market is assuming an EPS of $112.20, a growth of +18.2%. This implies a forward P/E of 18.2.

Using a PEG Ratio = 1.5 (multiple equal to 50% greater than the EPS growth rate), the market assumed an EPS of $107, a growth of +12.7%. This implies a forward P/E of 19.1.

Using a PEG Ratio = 2.0 (multiple equal to 100% greater than the EPS growth rate), the market assumed an EPS of $104.20, a growth of +9.8%. This implies a forward P/E of 19.6.

What is a reasonable price for the S&P 500? Well, if you assume a relatively flat EPS for next year of $95 and a forward P/E of 15, it yields a price of $1,425, which is down 30% from current levels. Even if EPS gets back to 2014 levels of $105.96 and a forward P/E of 15, it yields an S&P 500 price of $1,590, down -22%.

]]>(in millions)

S&P 500: $3,259 - $724,773

S&P 400: $737 - $11,832

S&P 600: $86 - $4,304

Dated: 31Mar2015

Source: S&P Dow Jones Indices

]]>(in millions)

S&P 500: $3,259 - $724,773

S&P 400: $737 - $11,832

S&P 600: $86 - $4,304

Dated: 31Mar2015

Source: S&P Dow Jones Indices

]]>Link to original article: seekingalpha.com/instablog/620714-zach-tripp/3042665-fidelity-7twelve-diversified-protfolio

Even though this past December was only the 4 month mark, I want to get into the habit of annual rebalancing. With the fall in oil and overall commodities prices, I waited until the end of January.

Am I trying to time the market? Yes and No. I know I cannot time the market. Chances are, oil and commodities will continue to fall. At the moment it looks like the Natural Resources fund has settled around $30/share.

You can see, since July-2014 the leaders were the REIT fund and the S&P 500. The losers were Pimco's commodity fund and the Natural Resources fund.

]]>Link to original article: seekingalpha.com/instablog/620714-zach-tripp/3042665-fidelity-7twelve-diversified-protfolio

Even though this past December was only the 4 month mark, I want to get into the habit of annual rebalancing. With the fall in oil and overall commodities prices, I waited until the end of January.

Am I trying to time the market? Yes and No. I know I cannot time the market. Chances are, oil and commodities will continue to fall. At the moment it looks like the Natural Resources fund has settled around $30/share.

You can see, since July-2014 the leaders were the REIT fund and the S&P 500. The losers were Pimco's commodity fund and the Natural Resources fund.

]]>