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Use forward P/E instead of trailing P/E!

Kirk Kinder

How about also using reported earnings versus operating earnings. I would venture a guess that the p/e ratio for the decades from the 1980s to the 1930s is based on reported earnings, not operating. This means that the P/E ratio shown here is even higher compared to previous decades if we compared apples-to-apples.

nick gogerty

wow think how relieved we will all be when those earnings simply grow 45%....or um something else happens...and the effective yield goes back to around 12 or 8% for equities.

hint: don't mention the something else happening bit to anyone.


A similarly skewed P/E occurred in the 1930s, too, with the "E" being crushed much like these days. So, your point is well taken.

Yet per any positive prospects near- and intermediate-term, with absolutely nothing being done since the lug nuts started coming off in '07 addressing the credibility of reported earnings -- with every layer of oversight binging on heaping helpings of fudge: this now being a decade-long (and running) scourge -- believability of anything reported in the private and public sector has become a bigger issue than anyone generally acknowledges. (And just because no one in the mainstream talks about this does not mean the trouble is not real.)

Indeed, what used to be considered the world's most transparent financial markets is better characterized a masterful deception.

David Merkel

You need to compare earnings yields to Baa Corporate yields.

Denis Ouellet

For a detailed analysis of PE ratios since 1927 see http://www.news-to-use.com/2009/03/s-500-index-pe-at-troughs-detailed-80.html

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