P/E Ratios

silverharp

Anyone have any analysis dealing with the current P/E ratios for the major indexes. From a couple of pieces that were sent to me, the conclusions of the writers are obvious


It is a fact that at true
secular bear markets the dividend yield and the
price earnings ratios will be roughly equal. As
an example, in 1932 the yield on the S&P 500
was 10.50% and the P.E. was just under 10. In
1942 the yield was 8.71% and the P.E. was 7.3.
At the 1974 bottom the yield was 5.9% and the
P.E was 7.24. In 1982 the yield was 6.2% with a
P.E. of 6.9. At the July bottom the yield was
2.46% and the P.E., based on Generally Accepted
Accounting Principles, which is how the values
at the historical lows mentioned above were
calculated, was 128. Yes, that is one hundred
and twenty eight. Not the phony bologna George
Orwellian number that I’ve recently seen
showing an “estimated” 19.9.

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woodseb

they are scary figures alright but i find that very hard to believe a p/e of 128 and yield of 300% on the s&p - i would like to see the underlying data to the calculation. the market dislocation of previous months and the massive rally can throw up some weird numbers that really don't tell you anything

silverharp

woodseb wrote: »

they are scary figures alright but i find that very hard to believe a p/e of 128 and yield of 300% on the s&p - i would like to see the underlying data to the calculation. the market dislocation of previous months and the massive rally can throw up some weird numbers that really don't tell you anything

I agree its a difficult time to try and trend earnings. I've been involved in a few restructurings for large companies and alot of games can go on like classing operating expenses as restructuring costs so it goes below the line. On the other hand if you are going to miss all your targets you might throw the kitchen sink in for good measure to make the following year look better.

I'd agree with the writer's general idea that some DNA markers for a bear market bottom would be a much lower PE ratio and a higher dividend ratio.