Long Term S&p... Pe Chart

[sniff]

This PE chart coutesy of Robert Shiller...Yale

 

I know this is not the 1930's but I do see some simularities.

 

One can probably read a lot into this chart. But two things caught my eye.

 

1... after each prick, the rate of decent. Could even call it parabolic for that long timeframe.

 

2... the overshoot , in 1930 the line did not stop at the average. But continued well past. The red circle and possible projection of current bubble. ( The air is still coming out)

 

We had this discussion about a year ago... And most felt that the average was about PE 15 and a momentum overshoot would be about PE 12

 

But this chart seems to suggest about 6....... if history comes close to repetition. ... Could that happen? Or is there more to this chart than I see?... Some might say it is different this time, but is it really?

[Pretzel Logic]

6-9 p/e is not at all an unreasonable assumption. I am largely expecting we'll see these valuation-levels before the cycle completes. And when we reach those types of valuations, that will be the time to truly start buying "for the long haul." Unless you subscribe to the Hypertiger scenario... then you should put your money into something safe, like canned goods, ammunition, and vegetable seeds.

[SideshowBob]

sniff,

 

We have a new economy, P/E's don't matter anymore!!! :grin:

 

This time it's different!!!

 

SSB

 

P.S. My guess is we bottom around a P/E of 10 in 2005-2006. After that, we still may not see current levels for another 10 years, unless we get some rampant inflation.

[ThorAss]

In the bullish case, yes. When stocks are paying twice the bank rate in dividends in order to attract investment and volume drops to nothing. Floor traders go to work to catch up on their sleep. Stocks are universally shunned by the public and the media shills. That will be the time to buy as nothing else is likely to produce superior long term returns. Your investments may go nowhere for years but you continue to get dividends. 3M @ 3$ with .05c a quarter dividend will start looking like a good place to park your cash. Money markets at .001% will not.

 

In the bearish case, they'll be nothing to buy, no market to buy it from and no acceptable currency to buy it with.

[Grand Poopercycle]

Could Elliott-type analysis be applied to the P/E graph, and thereby generate a target? SG, End ?

[Goldilocks]

- The answer is simple. It will go lower than it ever has before. HT scenario or not.

 

 

- Another chart like this I see quite often is the Dow/Gold ratio. Everyone I see picks ratios above 1 as the bottom. Why? It is going to go far under one and will in fact invert and be measured the other way. As the Gold/Dow ratio. People will laugh at the sheer stupidity of their forebears who once sought paper over metals. The damnable fools.

[machinehead]

So far 2000-2003 resembles 1929-32. But don't neglect the 'slow-motion' declines in 1901-21 and 1966-82. That's what an 'inflationary cushion' can do - make the collapse happen in slow motion.

 

Inflation or deflation is all-important in knowing which scenario we get -- sudden death or long fade. The 10-year Treasury note was probing its Oct. 2002 forty-year low again today ... double bottom or pending breakdown in yield? The direction of Treasury yields from here -- up or down -- will be an important clue to which stock market scenario plays out.