This is a record, and double where it was during the tech bubble.
More facts: consumer discrtionary P/E multiple have expanded to post-2002 highs after a 40% rally from March lows.
AAII survey shows share of bulls has surged from 18.9% to 42.7%, same as levels in January when last "bull market" rally ended.
If the market's estimate of $70 forward earnings is off a tad, watch out below.
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15 comments:
Tyler, where do you find the trailing earnings multiple ?
if it is off? lol
david rosenberg
And invest in what instead? Treasuries? Cash? What's your alternative? Even if S&P earnings were $50 on a forward basis the S&P at 1,000 (5% earnings yield) if much better than treasuries yielding nothing if you have a long enough time horizon. There's no law that says the market needs to be priced to yield 10%.
http://en.wikipedia.org/wiki/Greater_fool_theory
And invest in what instead? Treasuries? Cash? What's your alternative? Even if S&P earnings were $50 on a forward basis the S&P at 1,000 (5% earnings yield) if much better than treasuries yielding nothing if you have a long enough time horizon. There's no law that says the market needs to be priced to yield 10%.
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Loans the FDIC is selling for 50 cents, give or take.
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Don't blame it on the Rally Monkey!
Also, this makes a good argument to trade a range bound market as we know they won't let it decline beyond a certain point and the upside has been reached so they need to modify a time delta.
Think about your Dupont analysis: raw material inflation into a deleveraging world in which your customers are distressed means higher costs and lower revenues, or lower profit margins. Lower sales also means lower asset turn so that component is also pointing to lower ROE. Finally you have less leverage and higher taxes which further undermines ROE. And lower ROE combines with less investment means less growth and a lower P/E ratio to go with the lower E.
Hmmm, someone on the Mayo call reads ZH- just heard the Dupont breakdown argument on the call.
mayo/whittney moves are signals of the bottom in financials. their brands are dependent upon being bearish. they sold their brands at the top of the bear sentiment bubble. nobody's listenting to them anymore. they are listening to the rumble of the trillions of $ in cash and treasuries just itching to be redeployed.
not trillions: gillions... nay, bazillions!
@ anonymous 12:53
you forgot that cramer also called the bottom in financials.
Do I understand correctly that you say the SPX P/E is 100x? Looks more around 12x to me. Where did you get this number?
Nice points, thanks! The technicals have been continuing to look concerning to me so this shows somes reason why.
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