Check out the present P/E ratio of the S&P 500

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cswift01
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Check out the present P/E ratio of the S&P 500

Post by cswift01 »

http://www.multpl.com/

Enjoy!

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Me

cashworth
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Re: Check out the present P/E ratio of the S&P 500

Post by cashworth »

Would it be logical to expect earnings to stabilize this ratio in 2018? We think many tax changes and regulation changes are already priced in, but earnings are yet to be seen.

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mjedlin66
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Re: Check out the present P/E ratio of the S&P 500

Post by mjedlin66 »

Holy crap. Look at 2009! Wooo-eee!
Owner/creator of TSPcalc.com - "Know your numbers"

Regularguy
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Re: Check out the present P/E ratio of the S&P 500

Post by Regularguy »

So currently the price per share is at 25.68 times what each share has reported earning this year?
At approx 2750 per share divided by 25.68 means 107.08 earnings per share?

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cswift01
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Re: Check out the present P/E ratio of the S&P 500

Post by cswift01 »

Regularguy wrote:So currently the price per share is at 25.68 times what each share has reported earning this year?
At approx 2750 per share divided by 25.68 means 107.08 earnings per share?
Remember that this is only the S&P 500 P/E ratio. The cape is 33.09. A bit higher...

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Me

mindofmush
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Re: Check out the present P/E ratio of the S&P 500

Post by mindofmush »

OMG that CAPE is so high, it's higher than 1929 just before the Big Crash and when Fed Pres Powell raises the interest rate, it will make the this crash worse and the US will declare bankruptcy and China will buy the US in the fire sale and we'll all have to speak Chinese and it's all Trump's fault.
mo meng, mo ching (which loosely means: no money, no life)

Efire
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Re: Check out the present P/E ratio of the S&P 500

Post by Efire »

https://www.nasdaq.com/symbol/amzn/pe-ratio
DON'T look at PE of Amazon. Bad apple ruins the whole average.

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cswift01
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Re: Check out the present P/E ratio of the S&P 500

Post by cswift01 »

Efire wrote:https://www.nasdaq.com/symbol/amzn/pe-ratio
DON'T look at PE of Amazon. Bad apple ruins the whole average.
I see what you mean (in terms of the average). Someone also referred to the fact that the CAPE was a 10 year cycle, which would include 2008. That's also a great point too. On the other hand, things happened whenever the CAPE was too high, so we'll see what happens. Most still find the yield curve to be the best indicator.

mindofmush
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Re: Check out the present P/E ratio of the S&P 500

Post by mindofmush »

The yield curve is a great indicator for a correction that won't occur for 6 to 12 months (and the yield curve usually reverts to normal before the bottom drops out). When the yield curve flattens or inverts, it just means it's time to watch the other economic factors more closely. (PMI, ISM, Factory orders, ADP employment, weekly jobless claims, unemployment rate, non-farm payrolls, new mortgage applications, Ford F150 sales and even the trade deficit)

CAPE means Cyclically Adjusted Price to Earnings ratio. It is defined as price divided by the average of ten years of earnings (moving average), adjusted for inflation. The original definition of CAPE fails to take into account recent changes in the way earnings are calculated under modern accountancy rules. A quote from wiki:
The measure (CAPE) exhibits a significant amount of variation over time, and has been criticized as "not always accurate in signaling market tops or bottoms." One proposed reason for this time variation is that CAPE does not take into account prevailing risk free interest rates. A common debate is whether the inverse CAPE ratio should be further divided by the yield on 10 year Treasuries. This debate regained currency in 2014 as the CAPE ratio reached an all-time high in combination with historically very low rates on 10 year Treasuries.

I suppose the CAPE could be a useful indicator if it factored in the low earnings of the 2008-2009 Great Recession or it factored in the extremely low rates on 10 year treasuries or it factored in mega companies like Amazon with a PE over 300 skewing the PE of the entire NASDAQ or whatever index includes it. Looks like you'd have to factor it manually.

The more I learn, the more I find that there is more I need to learn.
mo meng, mo ching (which loosely means: no money, no life)

TomS88
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Re: Check out the present P/E ratio of the S&P 500

Post by TomS88 »

That's a great chart.

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cswift01
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Re: Check out the present P/E ratio of the S&P 500

Post by cswift01 »

mindofmush wrote:The yield curve is a great indicator for a correction that won't occur for 6 to 12 months (and the yield curve usually reverts to normal before the bottom drops out). When the yield curve flattens or inverts, it just means it's time to watch the other economic factors more closely. (PMI, ISM, Factory orders, ADP employment, weekly jobless claims, unemployment rate, non-farm payrolls, new mortgage applications, Ford F150 sales and even the trade deficit)

CAPE means Cyclically Adjusted Price to Earnings ratio. It is defined as price divided by the average of ten years of earnings (moving average), adjusted for inflation. The original definition of CAPE fails to take into account recent changes in the way earnings are calculated under modern accountancy rules. A quote from wiki:
The measure (CAPE) exhibits a significant amount of variation over time, and has been criticized as "not always accurate in signaling market tops or bottoms." One proposed reason for this time variation is that CAPE does not take into account prevailing risk free interest rates. A common debate is whether the inverse CAPE ratio should be further divided by the yield on 10 year Treasuries. This debate regained currency in 2014 as the CAPE ratio reached an all-time high in combination with historically very low rates on 10 year Treasuries.

I suppose the CAPE could be a useful indicator if it factored in the low earnings of the 2008-2009 Great Recession or it factored in the extremely low rates on 10 year treasuries or it factored in mega companies like Amazon with a PE over 300 skewing the PE of the entire NASDAQ or whatever index includes it. Looks like you'd have to factor it manually.

The more I learn, the more I find that there is more I need to learn.
I saw this article on MarketWatch and thought of your comment:

(excerpt)
Based on the cyclically-adjusted price-to-earnings (CAPE) ratio, which compares stock prices with corporate earnings over the past 10 years, the S&P currently has a ratio of 32.65, a level only exceeded by the dot-com era.

Based on this level, “investors should expect an annualized excess return for ten years of -2.04%,” Lebowitz wrote. “Based on historical data, which includes 32 full business cycles dating back to 1871, the best excess return experienced for all instances of CAPE over 30 is 0.39%.” Of the 57 months where the CAPE exceeded 30, he added, only four of those months featured a return that exceeded Treasury bonds. Of those four, the average excess return was just 0.2%.

https://www.marketwatch.com/story/do-st ... 2018-03-20

I don't agree with his statement, but I did enjoy the data he sprouted. Hopefully it gives you more to think of, as it does for me as well.

Thanks,

Me

mindofmush
Posts: 353
Joined: Mon Jul 02, 2012 1:38 pm

Re: Check out the present P/E ratio of the S&P 500

Post by mindofmush »

Powell said the economy is doing good and raised the rate, is he lying?

While this increased volatility makes it interesting for mutual funds, I love the higher put option premiums. Warren Buffett sold insurance, I will too.
mo meng, mo ching (which loosely means: no money, no life)

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