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Tuesday, February 24, 2009

SPX Relative to Normal P/E Range

I was just kidding about SPX 400 target but I've got a reply saying SPX 600 target is based on P/E. I don't know if it's true or not, just want to share with you an interesting chart from



  1. How is the "E" defined for this chart? Is it trailing 12-month, forward 12-month, etc.?


  2. No idea. Decisionpoint doesn't say anything about it.

  3. Without that information, this chart is worthless. Actually, its worse than worthless, because if the "E" is based on "forward" earnings, then the P/E ratio is likely understated due to perpetually over-optimistic earnings projections.

  4. p/e is only relative to the risk free rate. where where interest rates when the market traded at 10x earnings? where was inflation, you won't see 10x multiple on the market unless inflation and interest rate explode which won't happen before earnings grow notionally

  5. In trough earnings the growth rate is positive, which changes the P/E... To like 20

    LOL... and the chart, shows in 2000 the market bottomed with like a p/e of 40...

    that is funny, show another.

  6. Sorry, guys, that's all I have now. I myself consider this chart interesting, I will sure not make any decision simply based on that chart. So it's for fun only.



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