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Category Archives: P/E

A new S&P500 peak. Greater Fools Rush In.

Today’s relief rally / short covering rally was impressive. A new all-time high (1745) was set on the S&P500 (1729 was the previous all time peak).  However, once the shorts have fully covered (are they done yet?), we’ll see how much buying support there is. With a P/E (cyclically adjusted P/E) of 25, we are now 50% above the long term mean (and that’s […] Read the rest of this entry »

Spot the bubble

  Over the past 2 years, the S&P500 has grown at 5X the speed of earnings growth. Therefore 80% of the reason for the stock market’s climb over the past 2 years may be attributable to P/E expansion alone.  Recently, that reached 25 (on a CAPE basis). Earnings on the above plot are trailing twelve month as-reported earnings. They’ve gone from $87 in Q3 […] Read the rest of this entry »

The CAPE =23. Uh oh.

The S&P500 cyclically adjusted price earnings ratio (CAPE)  -or adjusted P/E for short- reached 23.09 yesterday. Every rally off the March 2009 bottom died when the monthly average adjusted P/E approached or attained this level. So far, the monthly average is 22.8.  Now that you know this, if you stay long risk assets, you must be assuming this trend is not going to apply now. […] Read the rest of this entry »