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The One Eyed Guide (http://www.oneeyedguide.com) is Bob Small who: solo traveled to 25 countries by age 21, has a degree in Economics, an MBA from Columbia University in Marketing and Finance, has been a brand manager, was a licensed stock and options broker during the 87 crash, ran a $450... More
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  • No Bottom in the Market Yet 3 comments
    May 12, 2009 3:57 PM

    People debating on whether to get back in the market should look at Robert Shiller's S&P500 Price Earnings Valuation Data at www.irrationalexuberan...  As of May 5, the PE was 15.9 and, while this is not historically high, it is about twice the historical bottom on the market. 

    The chart below shows the highs and lows of S&P500 PE valuation going back to 1881. The 2000 PE peak of 43 was an all time high and the drop after it, while long and painful, has not declined to previous valuation lows.  Matching the previous low will result in a S&P500 of 460 or lower, down around 50% from Monday's 909. 

    Robert Shiller S&P500 PE Calculation

    New long term investing should be done only after a bottom is defintely in - Any investing before a clearcut bottom is speculation, though it can certainly be profitable.  ...

    Themes: US Market
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Comments (3)
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  • Alan Young
    , contributor
    Comments (2360) | Send Message
     
    Good chart. How can you adjust it for fictitious (i.e. bailout-based) earnings?
    13 May 2009, 02:39 PM Reply Like
  • Philip Mause
    , contributor
    Comments (3472) | Send Message
     
    The 1981 bottom was at a time of high interest rates. We should expect a higher PE bottom when rates are low. On the other hand, in 1932 interest rates were low and the PE bottomed at 6. I think we should expect a higher PE bottom unless we are heading into a repeat of the Great Depression
    13 May 2009, 04:47 PM Reply Like
  • One Eyed Guide
    , contributor
    Comments (269) | Send Message
     
    Author’s reply » This is Robert Shillers chart and uses 10 year average earning which is also what Ben Graham reco'd. This should minimize the effect of fictitious earns and they may be adjusted out completely as earnings are adjusted in later years.

     

    On May 13 02:39 PM Alan Young wrote:

     

    > Good chart. How can you adjust it for fictitious (i.e. bailout-based)
    > earnings?
    18 May 2009, 09:15 AM Reply Like
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