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How Expensive is the S&P, Really
06-05-2005, 08:48 PM
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#1
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Full time employment: Posting here.
Join Date: Dec 2004
Posts: 714
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How Expensive is the S&P, Really
I understand that the historic S&P PE average is 16.6 ... bigcharts.com indicates S&P is currently at 19.37. (assuming for the moment both are based on the same calc ...)
The most interesting thing I've seen on this board is how many folks are mainly in cash or bonds ... either the equity holders are quiet, or in the minority.
While the market is clearly not cheap, do you really perceive its level to be the danger some note?
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Re: How Expensive is the S&P, Really
06-05-2005, 08:54 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Feb 2004
Posts: 2,670
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Re: How Expensive is the S&P, Really
Quote:
The most interesting thing I've seen on this board is how many folks are mainly in cash or bonds ... either the equity holders are quiet, or in the minority
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58% of the voters said they are now putting new money in equities based on this recent poll...
http://early-retirement.org/forums/i...?topic=3027.15
So I don't think they are in the minority or quiet for that matter.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
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Re: How Expensive is the S&P, Really
06-05-2005, 11:15 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Feb 2003
Location: Mesa
Posts: 3,588
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Re: How Expensive is the S&P, Really
Quote:
Originally Posted by Charles
I understand that the historic S&P PE average is 16.6 ... bigcharts.com indicates S&P is currently at 19.37.* (assuming for the moment both are based on the same calc ...)
The most interesting thing I've seen on this board is how many folks are mainly in cash or bonds ... either the equity holders are quiet, or in the minority.
While the market is clearly not cheap, do you really perceive its level to be the danger some note?
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Some of us really do believe in asset allocation. When I invest new money or rebalance, I put money where my allocations are below my target allocations. I have been doing that for many years. I don't worry about historical P/E levels, or historical P/E10, or any other metric that attempts to quantify valuations.
P/E is the ratio of current price (which we all know has nothing to do with future performance) and past earnings (which has nothing to do with the future). But even if P/E were a good measure of future valuations, P/E can fall without requiring the market to fall. Some people seem to forget about the fact that the denominator is a measure of corporate financial efficiency.
So why would I let P/E drive my decisions? Market timers think they have a good answer to that question. Allocators don't.
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Re: How Expensive is the S&P, Really
06-05-2005, 11:24 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Feb 2003
Location: Nomadic in the Rockies
Posts: 2,720
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Re: How Expensive is the S&P, Really
Very well put SG.
I think I'm better off feeding the bears than guessing wrong on an allocation shift. Maybe everything's overvalued, but cash doesn't look cheap, either!
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Re: How Expensive is the S&P, Really
06-06-2005, 12:00 AM
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#5
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Full time employment: Posting here.
Join Date: Aug 2004
Posts: 911
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Re: How Expensive is the S&P, Really
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Re: How Expensive is the S&P, Really
06-06-2005, 04:54 AM
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#6
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Thinks s/he gets paid by the post
Join Date: Dec 2002
Posts: 3,875
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Re: How Expensive is the S&P, Really
Quote:
Originally Posted by - SG
Some of us really do believe in asset allocation.* When I invest new money or rebalance, I put money where my allocations are below my target allocations.* I have been doing that for many years.* I don't worry about historical P/E levels, or historical P/E10, or any other metric that attempts to quantify valuations.
P/E is the ratio of current price (which we all know has nothing to do with future performance) and past earnings (which has nothing to do with the future).* But even if P/E were a good measure of future valuations, P/E can fall without requiring the market to fall.* Some people seem to forget about the fact that the denominator is a measure of corporate financial efficiency.
So why would I let P/E drive my decisions? Market timers think they have a good answer to that question.* Allocators don't.* *
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I am quite sure I will stick with my "no stocks" portfolio forever. If I did own
stocks I certainly would not "let P/E drive my decisions".
JG
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Re: How Expensive is the S&P, Really
06-06-2005, 08:41 AM
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#7
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Re: How Expensive is the S&P, Really
P/E is only one of the ratio used in fundamental analysis. There are others: P/S, P/B, ROE, etc.
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May we live in peace and harmony and be free from all human sufferings.
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Re: How Expensive is the S&P, Really
06-06-2005, 09:02 AM
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#8
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Re: How Expensive is the S&P, Really
Charles,
I with SG on this. I let my asset allocation control my investing. Set it, forget it - and rebalance yearly.
This is probably the reason that you don't hear too much from this crowd. We don't have to decide what to do everyday, don't have to try to convince ourselves or anyone else.
We basically admit failure to time the markets, and our inability to pick individual stocks. We have looked ourselves in the mirror and know that 'we are the problem' - and to quote unclemick "our best moves have been to do nothing."
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Re: How Expensive is the S&P, Really
06-06-2005, 10:40 AM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
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Re: How Expensive is the S&P, Really
Unfortunately most of the indicators suggest the equity market is solidly overpriced. While the "E" can change without the "P", many CEO's are suggesting that their "E" is as good as its going to get and likely to go downhill.
Wouldnt it suck if the P and the E both went down?
I do agree with good asset allocation, but my equity purchases in the last year have been limited to buying reits on the dip, energy, stocks in precious metals companies and high dividend paying large cap value stocks.
Heck, the dow and s&p are back to levels they 'achieved' in the 00 bubble. Why is that ok now?
I think if you're buying an S&P 500 index or TSM index right now, you're in for a surprise in the next couple of years. Remember I said that, so when it happens someone isnt prancing around saying its 20/20 hindsight.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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Re: How Expensive is the S&P, Really
06-06-2005, 10:54 AM
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#10
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Moderator Emeritus
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Re: How Expensive is the S&P, Really
Quote:
Originally Posted by retire@40
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I thought TH paid for that study...
The rest of you voted more than once, right?
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Re: How Expensive is the S&P, Really
06-06-2005, 10:59 AM
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#11
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Thinks s/he gets paid by the post
Join Date: Feb 2004
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Re: How Expensive is the S&P, Really
Quote:
Originally Posted by th
I think if you're buying an S&P 500 index or TSM index right now, you're in for a surprise in the next couple of years.* Remember I said that, so when it happens someone isnt prancing around saying its 20/20 hindsight.
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Good surprise or bad surprise?
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No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
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Re: How Expensive is the S&P, Really
06-06-2005, 11:00 AM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
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Re: How Expensive is the S&P, Really
Oh I think its going to be a very, very bad surprise.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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Re: How Expensive is the S&P, Really
06-06-2005, 11:04 AM
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#13
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Join Date: Feb 2004
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Re: How Expensive is the S&P, Really
Quote:
Originally Posted by th
Oh I think its going to be a very, very bad surprise.
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I was hoping you would say good.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
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Re: How Expensive is the S&P, Really
06-06-2005, 11:22 AM
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#14
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Re: How Expensive is the S&P, Really
Quote:
Originally Posted by th
I think if you're buying an S&P 500 index or TSM index right now, you're in for a surprise in the next couple of years. Remember I said that, so when it happens someone isnt prancing around saying its 20/20 hindsight.
Oh I think its going to be a very, very bad surprise.
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There probably is a way to put your money where your mouth is. Maybe something like shorting the index, or at least the stocks that you expect to go south. Why go for bragging rights when you are talented enough to make a bunch of money.
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Re: How Expensive is the S&P, Really
06-06-2005, 11:34 AM
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#15
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Re: How Expensive is the S&P, Really
Quote:
Originally Posted by Nords
The rest of you voted more than once, right?
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I'm voting twice a month. On the first and 15th.
th, I don't see how it's going to be a surprise if everyone's predicting the doom and gloom from overvaluations. I paid off my debt, I'm looking to move back near family, and I'm keeping recurring expenses low. That will help me through any situation. If I were to put new money in cash it may burn more through inflation while I wait for the right time to buy equities. Besides, I don't know when to buy, so I stick with my allocation. In my situation I'm confident I can withstand a protracted bear or slide, but I have no clue as to whether I could survive a mistimed strategic allocation shift. I changed my avatar to reflect this attitude.
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Re: How Expensive is the S&P, Really
06-06-2005, 01:28 PM
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#16
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Re: How Expensive is the S&P, Really
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Re: How Expensive is the S&P, Really
06-06-2005, 01:31 PM
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#17
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Thinks s/he gets paid by the post
Join Date: Feb 2004
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Re: How Expensive is the S&P, Really
Quote:
Originally Posted by th
I think if you're buying an S&P 500 index or TSM index right now, you're in for a surprise in the next couple of years.* Remember I said that, so when it happens someone isnt prancing around saying its 20/20 hindsight.
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I thought about this and I'm going to say the opposite. *In 2 years you'll be in for a good surprise. *What the heck, I've got a 50/50 shot too. *See you in 2 years.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
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Re: How Expensive is the S&P, Really
06-06-2005, 01:52 PM
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#18
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Thinks s/he gets paid by the post
Join Date: Feb 2003
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Posts: 3,588
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Re: How Expensive is the S&P, Really
Just ran accross this bit of analysis over on gummy's site.
http://www.gummy-stuff.org/doom-gloom.htm
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Re: How Expensive is the S&P, Really
06-06-2005, 01:58 PM
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#19
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Re: How Expensive is the S&P, Really
I predict a good surprise, then a not-so-good one, then a bad one, and an unsurprising period followed by two pretty-good surprises.
Thought I'd search for some old predictions on this forum. *Here's one from March 8, 2004 from Mr. John Galt:
* *"I predict interest rates will not change much in 2004."
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Re: How Expensive is the S&P, Really
06-06-2005, 02:10 PM
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#20
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Thinks s/he gets paid by the post
Join Date: Feb 2003
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Posts: 2,720
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Re: How Expensive is the S&P, Really
Some predictions I read recently but can't find the link to:
20 years from now:
The new generation will develop and embrace a music style that will be unmusical and offensive to people who listen to rap today.
Adults will decry how much lazier and more unproductive the new generation is.
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