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Old 10-10-2018, 08:30 AM   #21
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Originally Posted by USGrant1962 View Post
I've used that calculator too, and like it. But there is something wrong with how they calculate PE1. TTM PE for the S&P 500 is currently 23.5, not 55.
Thanks, that's what I figured. Maybe only partial earnings data for the last year (denominator), but the data set for stock prices is complete (numerator), so the number is in error to the high side.

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Old 10-10-2018, 09:53 AM   #22
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Interesting about the PE8. I've "tortured" the Schiller data a bit myself (lol), but always stuck with 10 years.

I'll admit to only applying brief first level thinking on the shorter analysis span, but it seems not to give any momentum to the "it's different this time" position, does it?

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Old 10-10-2018, 03:50 PM   #23
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Originally Posted by sengsational View Post
I'll admit to only applying brief first level thinking on the shorter analysis span, but it seems not to give any momentum to the "it's different this time" position, does it?
No, I don't think so. If anything, it excuses the need to try to rationalize the present high PE10--"it's not anything unusual, stock prices aren't as igh as they seem. Look what happens when we drop those low earnings from 2008 and 2009. See! It is heading back to the mean. Nothing to see here--keep buying!"

Interestingly, when we lengthen the PE "smoothing period," the average for the whole period goes up slightly. For example, with the same data set (1873 to present), the:
PE2 average is 15.7
PE5 average is 16.0
PE10 average is 16.9
PE15 average is 17.7
PE20 average is 18.4

I don't know enough about how the number is calculated to explain why this is so. It might be due to the overall upward trend in prices over the data set, or the difference in the "slope" of uptrends vs downtrends. But there it is: if you cut the series into smaller chunks, stocks get cheaper relative to earnings.
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Old 10-10-2018, 03:55 PM   #24
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Originally Posted by samclem View Post
Some observations on the current PE10:
1) Some analysts have noted that the present CAPE (PE10, which is 35.09) is high partly because of the low corporate earnings in the aftermath of the 2008 financial crisis, and that as these bad years fall off the back of the 10 year data set, the average earnings would go up and the CAPE would go down, which would indicate maybe stocks aren't quite so overvalued . I looked at what the "PE8" would be--stock price /inflation adjusted earnings for only the last 8 years, and that number is 31.23. So, if over the next 2 years, stock prices and earnings stay relatively stable, it is true that the CAPE will decrease into "slightly less overvalued" territory.
2) The "PE1" (includes only last year's earnings) is over 55. Maybe that's some sort of statistical/calculation artifact. Here are the other "PEs, rounded to the nearest whole number:"
PE10: 35
PE9: 32
PE8: 31
PE7: 31
PE6: 31
PE5: 32
PE4: 33
PE3: 35
PE2: 38
PE1: 55

For geeks: The CAPE calculator I found at this site makes it easy to do this sort of lookback. Unfortunately, the site/calculator does >not< include a function to find the mean/median CAPE over various time periods, it only figures it for the whole data set (1873(?) to present). The site does offer CSV data of the Schiller series for those who want to torture the data even more in their own spreadsheet.
Right - I did those calcs a year ago, looking at PE7, and saw the difference was ~4 points, not nearly enough to get us out of well overvalued territory.
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Old 10-10-2018, 10:10 PM   #25
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Deleted. Misread OP

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