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Old 04-14-2010, 12:38 AM   #461
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The above P/E ratio of INTC is actually forward P/E, while the trailing P/E is around 30.

It's OK. Speaking as a holder of Intel shares as well as those of other chip makers, I am not selling rebalancing. Yes, the glass is half-full, and I am waiting for it to get near full before I will take a sip.
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Old 04-14-2010, 08:47 AM   #462
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The above P/E ratio of INTC is actually forward P/E, while the trailing P/E is around 30.

It's OK. Speaking as a holder of Intel shares as well as those of other chip makers, I am not selling rebalancing. Yes, the glass is half-full, and I am waiting for it to get near full before I will take a sip.
Thanks for that important detail. Articles never state which P/E they are using when they make pronouncements - very sloppy!

Audrey
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Old 04-14-2010, 09:01 AM   #463
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OK - so it took a couple of days. But with that impressive Intel report, S&P500 crossed above 1200 first thing this morning.

Audrey
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Old 04-14-2010, 09:19 AM   #464
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Valuations, returns, and math

Just a follow up on what the difference in valuations between PE10 and 2010 PE mean. Is it possible that both Ha and I are right? Possibly.

If we use 2010 earnings as a baseline and assume normal earnings and dividend growth from here for the next decade, what happens to returns and valuations? Based on those assumptions, and a 3% inflation rate, PE10 declines from almost 22x now to 16.2x in 2019 (compared with Shiller's long-run average of 16.4x). Nominal returns for the SPX bought today are almost 8% in that scenario.

So 8% total returns for equity are consistent with declining PE10 valuations, as long as current earnings are a valid baseline for normal future growth.
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Old 04-14-2010, 09:33 AM   #465
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With respect to the numerator vs denominator, use of PE10 pretty well guarantees that it is the numerator. To see why this is correct (or not), it may be necessary to read the books and from one's own opinions.
The numerator drives the current PE10 calculation but not the predicted outcome of a future lower PE and below average returns for the upcoming decades. If you believe low returns will be the result of sustained low E then the price should eventually fall and stay low. If you believe returns will be low due to high volatility then price will continue to rise and fall. These two scenarios require much different portfolio strategies.
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Old 04-14-2010, 09:36 AM   #466
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The numerator drives the current PE10 calculation but not the predicted outcome of a future lower PE and below average returns for the upcoming decades. If you believe low returns will be the result of sustained low E then the price should eventually fall and stay low. If you believe returns will be low due to high volatility then price will continue to rise and fall. These two scenarios require much different portfolio strategies.
Thank you, that had not occurred to me. As I said, I cannot paraphrase 2 fairly subtle, long books. However, there is an implicit reliance on what has been true of the US economy for many, many years-earnings growth fluctuates around a trendline that over time has been around 3.5% real. There is some discussion that this is now lower, but it has nothing at all to do with the reasoning behind the predictive value of PE10. PE10 is assumed to be a signal with a fairly stable, ten year smoothed denominator, and a more variable numerator. This assumption also conforms to observed reality

People should not assume that I wish to defend the thesis; I don't. My goal was only to clarify my posture for myself. I should have written it, then put it on my desktop rather than on this forum which is perhaps not the best place for this type of post.

If one is interested in this approach to valuation, or even the concept of valuation, he should read the books and decide for himself.

Ha
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Wish I had thought of that!
Old 04-14-2010, 09:57 AM   #467
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Wish I had thought of that!

I really enjoy seeing the results of clever data mining:
Truckers’ Credit-Card Swipes Point to Broader Rebound (Update1) - Bloomberg.com
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Old 04-14-2010, 09:58 AM   #468
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Actually, Ha - I found your post and the resulting discussion highly valuable, so I am very glad you posted it.

Audrey
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Old 04-14-2010, 11:45 AM   #469
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Actually, Ha - I found your post and the resulting discussion highly valuable, so I am very glad you posted it.

Audrey

Me too, I really found it interesting . I don't comment a lot on certain aspects of investing because I am not as knowledgeable as a lot of our members but I do read all the posts and enjoy the different insights .
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Old 04-14-2010, 02:44 PM   #470
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Well I I went from 20 to 30% stocks this AM...

No need to worry about the tax revenue shortfall, Im gonna send em a LARGE payment tomorrow
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Old 04-14-2010, 03:19 PM   #471
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Now the tax payment tomorrow is not related to your change of AA, right?

Otherwise, I'm confused....

Audrey
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Old 04-14-2010, 03:49 PM   #472
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OK - so it took a couple of days. But with that impressive Intel report, S&P500 crossed above 1200 first thing this morning.

Audrey
And closed there on healthy volume
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Old 04-14-2010, 04:14 PM   #473
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No I just went long SPY and VTI.

I've been waiting for a dip to buy back in but I don't think were gonna see it for a bit longer.

I see no end of easy $$$ from the FED in sight with the CPI number and employment and real estate troubles...

Earnings are coming in good...

Im getting greedy and I think we might see more buying from others on the sidelines...

My stop losses are set and I have LOTS of dry powder to put to work...

Still a long term bear but I like $$$
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Old 04-14-2010, 04:46 PM   #474
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And closed there on healthy volume
No kidding - that ended up being a very healthy leap on healthy volume! 1210 no less!

Impressive! The run keeps surprising me.

Meanwhile - I keep creeping closer to needing to rebalance.....

According to the astrologically based Bradley Turn Dates*, this party could last until 8/10/10. Who knows!?!?

Audrey
* 2010 Bradley Turn Dates | Bradley Siderograph | Astrology, Donald Bradley, Arch Crawford & Peter Eliades
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Old 04-14-2010, 04:51 PM   #475
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Still a long term bear but I like $$$
Well, it may surprise you, but I'm a long term bear too.

But from the point of view that we are in a secular bear market 2000-2017 or thereabouts until we enter a new secular bull (perhaps).

Meanwhile, even secular bear markets have bull market cycles. We could still have a good market for a while before potentially one more bear cycle before 2017 - or we could just muddle along stuck in a tight trading range until then.

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Old 04-14-2010, 05:02 PM   #476
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Meanwhile, even secular bear markets have bull market cycles. We could still have a good market for a while before potentially one more bear cycle before 2017 - or we could just muddle along stuck in a tight trading range until then.

Audrey
Or we could have that bear cycle soon. There, that a should cover all bases. Which one it will be, I have no clue.
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Old 04-14-2010, 05:16 PM   #477
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Don't worry I have PLENTY left to rant about and I will be vindicated soon
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Old 04-14-2010, 05:22 PM   #478
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If we have good numbers on the continuing unemployment claims and earnings keep coming in good...

1225 S$P could be here soon

Y'all better start sellin
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Old 04-14-2010, 05:31 PM   #479
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Or we could have that bear cycle soon. There, that a should cover all bases. Which one it will be, I have no clue.
Same here! I just rebalance occasionally. And I know you religiously take your meds!

Audrey
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Old 04-14-2010, 05:33 PM   #480
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Don't worry I have PLENTY left to rant about and I will be vindicated soon
OOOOOOOooooooo! We are doomed, doomed I tell ye!

But I'm expecting to see S&P500 1250 first!

Audrey
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