S&P P/E ratio at 143;1?

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HarryFlashman's picture
HarryFlashman
Status: Bronze Member (Offline)
Joined: Aug 1 2008
Posts: 54
S&P P/E ratio at 143;1?

I've been having an arguement with a 'friend ' of mine for a couple of weeks,its about the P/E ratio of the S&P 500.

 

My friend is of the permabull,cognitive dissonance variety,when I was telling him about all the shit that was going to happen last year(and mainly I was right,except that oil would never be below 100$ again.........),he just laughed at me like I was a halfwit.Of course I was right as everyone here knows.I was particularly right about another big bank going after Bear,about Citi being in the crapper,and about AIG being in big trouble(it has to be said mainly because of what I learnt here,thank you Dr.Martenson).

 

Last week(or the week before),I was reading Market-Ticker and he came up with an astonishing assertion that the S&P share to earnings ratio was at 134;1 and provided the link to S&P's own website,which said exactly that.I sent this to my friend and all I got back was abuse.I asked in the spirit of wanting to learn as I had thought that this type of ratio indicated a massive bubble.He said it was all a big mistake and would be corrected soon.I watched,it didnt.Then yesterday,it increased to 143;1.Again,I faced a torrent of abuse,so I asked him "Why do you distrust the S&P's own data?".He directed me to go and work it out myself(which seemed like a lot of hassle,so I decided to come here and ask around) which I didnt fancy,being Mathsophobic.

 

Actually,I read something else today(when I googled it) that says that at the moment its 2000;1!!!!!!!

 

Can any market savvy person enlighten me?

HarryFlashman's picture
HarryFlashman
Status: Bronze Member (Offline)
Joined: Aug 1 2008
Posts: 54
Re: S&P P/E ratio at 143;1?

Heres the S&P website,its near the bottom of the page.

http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_500/2,3,2,2,0,0,0,0,0,1,11,0,0,0,0,0.html

 

And heres another blog thats quite scary if you think hard about it.Why is no-one talking about this??????

http://stockgeometry.blogspot.com/2009/07/wtf-trailing-s-500-pe-ratio-1912.html

HarryFlashman's picture
HarryFlashman
Status: Bronze Member (Offline)
Joined: Aug 1 2008
Posts: 54
Re: S&P P/E ratio at 143;1?

I feel terribly lonely in here.......................

gyrogearloose's picture
gyrogearloose
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 537
Re: S&P P/E ratio at 143;1?

Karl Denninger did a thing on this point fairly recently, cant locate it in a quick scan, but this was interesting, and you can use it to get to his site.

 

 

http://market-ticker.denninger.net/categories/4-Macro-Economics/P5.html

 

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1503
Re: S&P P/E ratio at 143;1?

Harry, it is what it is.  If the ratio is 150 or 200 or whatever it is, that's what it is.  I've seen similar charts to the one you posted and have read posts from well-known blogs and bloggers regarding these insane PE ratios.  You're friend is wrong and you're right.  Don't know what else to tell you.  The MSM isn't talking about it, but you will find plenty of coverage elsewhere.

RNcarl's picture
RNcarl
Status: Gold Member (Offline)
Joined: May 13 2008
Posts: 382
Re: S&P P/E ratio at 143;1?
Patrick Brown wrote:

Harry, it is what it is.  If the ratio is 150 or 200 or whatever it is, that's what it is.  I've seen similar charts to the one you posted and have read posts from well-known blogs and bloggers regarding these insane PE ratios.  You're friend is wrong and you're right.  Don't know what else to tell you.  The MSM isn't talking about it, but you will find plenty of coverage elsewhere.

Patrick,

What I implied in his question was, "at these insane P/E ratios, isn't the S&P in for a helluva crash?"

Sorry Harry if that is NOT what you were implying.

C.

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1503
Re: S&P P/E ratio at 143;1?

Yes Carl, but I'd bet the people buying or holding at these levels would tell you they are using forward-12-month earnings, which for whatever insane reason they think will be much higher.  Once reality hits them, then it has to crash. 

Headless's picture
Headless
Status: Gold Member (Offline)
Joined: Oct 28 2008
Posts: 363
Re: S&P P/E ratio at 143;1?

P/Es have been irrelevant for a few decades now; i.e., they are meaningless in a market that has essentially no dividends (Microsoft anyone? How long did they get away without paying a cent? Amazon! The original crooks that started the superbubblorama!). We've been living Ponzi lives in a Ponzi world, and only now, without the continued support of the innocent masses around the world, and with a demographic that's looking for steady retirement income (dividends!) has The End come into view.

This market has almost NO VALUE on a dividend paying basis. We're toast!

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