The top 100 stock
market authors
selected for publication
market authors
selected for publication
Wednesday, December 30 2009 |
11:23 EDT |
DJIA (DIA)
S&P 500 (SPY)
- A dramatic visual of how an earnings-less rally can produce a historic P/E ratio.
-
The Seeking Alpha 100
See all
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This news story has 18 comments:
current earnings are accounting gimmicks. Most financials declared huge losses this year so that they can beat year after year for the near future, and that probably skewed the data...
On Aug 21 12:19 PM tunaman4u2 wrote:
> Not only is recovery priced in... but boom times ahead is priced
> in.
On Aug 21 12:23 PM Jolly_Rancher wrote:
> But is boom time investor psychology priced in?
On Aug 21 12:29 PM Stone Fox Capital wrote:
> Unless your using the expected 2010 PE ratio your looking in the
> rear view mirror. Its hard to imagine that with a global recovery
> that the SP500 earns less then $80 making the current PE just 12.75.
> Whoever wrote that article is absurd!
On Aug 21 12:29 PM Stone Fox Capital wrote:
> Unless your using the expected 2010 PE ratio your looking in the
> rear view mirror. Its hard to imagine that with a global recovery
> that the SP500 earns less then $80 making the current PE just 12.75.
> Whoever wrote that article is absurd!
This chart presents a rather unusual view of the data as such, and is not particularly useful to investors.
Robert Schiller's PE measurements are much sounder, and are about 1/6th of what this graph is claiming.
A QE, stimulus, end mark to market, home\car rebate, government lending etc fueled recovery is sustainable long term!
On Aug 21 12:42 PM Mudduckk wrote:
> Keep smoking those green shoots bro. Not inhaling.
On Aug 21 12:49 PM Moses wrote:
> Wow the idiocy of these comments is amazing. First, financial companies
> have not made huge writedowns this year, in fact they suspended mark
> to market so they could in fact mask the true losses. Second, the
> S&P through two quarters has about $15 in earnings; with a multiple
> of 15 for the overall market the S&P would need to earn $53 for
> the last two quarters, something which it has never done! Falling
> credit, consumer spending, home prices, rising unemployment does
> not bode well for a recovery. Face the facts, the peak earnings
> of 2007 are not coming back in real dollar terms for a long, long
> time especially with the growing public sector which will drag down
> overall growth for the economy.
> Wow the idiocy of these comments is amazing.
Gee, the arrogance of name-calling morons is incredible. Wait, I just called someone a name...
> First, financial companies
> have not made huge writedowns this year...
Completely irrelevant. The financials' losses during the last year have skewed trailing 12-month P/E data to the point that it's meaningless. THAT's the point here.
> Second, the
> S&P through two quarters has about $15 in earnings; with a multiple
> of 15 for the overall market the S&P would need to earn $53 for
> the last two quarters, something which it has never done!
1. Wrong. Counting all data to date, S&P earnings through Q2 were: GAAP - $21.34; Operating - $24.11.
2. So you think the market's horizon is two quarters ahead. Brilliant.
3. Backing up, the last time the S&P 500 had something close to these earnings for the first two quarters was... well, let's just look at several years' data. Hope this comes out okay:
Year | H1 GAAP | H1 Oper | S&P close
2009 | $21.34 | $24.11 | 919.32
2003 | $23.02 | $25.40 | 974.50
2002 | $16.06 | $22.49 | 989.81
1999 | $23.47 | $24.94 | 1372.71
1998 | $20.16 | $22.35 | 1133.84
1997 | $20.91 | $21.69 | 885.14
Comparing these years (which is somewhat arbitrary, in that the sole selection factor was 1H earnings "close" to this year's), this year's market at 919 is on the cheap end. Take this as you will, it's just another data point.
> Falling
> credit, consumer spending, home prices, rising unemployment does
> not bode well for a recovery.
Actually, it bodes very well for a recovery; you can't have a recovery without a recession. The deeper the recession, the more likely a strong recovery. Think of a trampoline.
> Face the facts, the peak earnings
> of 2007 are not coming back in real dollar terms for a long, long
> time
How long is a "long, long, long time"? From the September 1979 S&P 500 earnings peak it took almost 4 years to reach the earnings bottom, and then it took 5.5 more years to regain the 1979 level. THAT was a long time. Do you think it's going to take us until 2016?
> especially with the growing public sector which will drag down
> overall growth for the economy.
Recently, the public sector was the only thing growing the economy - completely appropriate during a recession. The trick lies in backing the government out as the private sector recovers. Some of this happens automatically, since entitlement spending declines as the economy improves. But we're all looking at the same numbers, and we all know that much more will be needed.
I'm not going to bother responding to the rest of your comment but the simple fact that you cite operating income for P/E valuations says enough about your argument not to mention those pesky recurring "non-recurring" charges for GAAP. Clearly we can revert back to the good 'ole days of 2007 but with double the unemployment rate.
On Aug 21 02:11 PM Vox Rationalis wrote:
> On Aug 21 12:49 PM Moses wrote:
If the PEx of YOUR portfolio is 144, you can sell now and make a great return, then buy back in after a correction-- that is GOOD news, not bad. it is quite simple to figure the TTM and forward PEx of your portfolio, and you should do it at least weekly if you are trading, never if you are holding
> I'm not going to bother responding to the rest of your comment but
> the simple fact that you cite operating income for P/E valuations
> says enough about your argument not to mention those pesky recurring
> "non-recurring" charges for GAAP.
Just so everyone understands - you're so offended by my mention of operating earnings (which are tracked by S&P) IN ADDITION to GAAP earnings, that you're unwilling to waste your precious time rebutting my critique.
Do you know how pathetic that is?
> Clearly we can revert back to
> the good 'ole days of 2007 but with double the unemployment rate.
>