Tuesday, December 22, 2009

S&P 500 EMERGENCY


Source: S&P.com

S&P 500 Price to Earnings ratio:
12/31/1988 277.72 11.69
03/31/1989 294.87 11.81
06/30/1989 317.98 12.61
09/30/1989 349.15 14.74
12/31/1989 353.40 15.45
03/31/1990 339.94 15.69
06/30/1990 358.02 16.84
09/30/1990 306.05 14.08
12/31/1990 330.22 15.47
03/31/1991 375.22 17.92
06/30/1991 371.16 19.12
09/30/1991 387.86 21.77
12/31/1991 417.09 26.12
03/31/1992 403.69 24.93
06/30/1992 408.14 23.94
09/30/1992 417.80 23.16
12/31/1992 435.71 22.82
03/31/1993 451.67 22.77
06/30/1993 450.53 23.31
09/30/1993 458.93 22.49
12/31/1993 466.45 21.31
03/31/1994 445.77 19.63
06/30/1994 444.27 17.63
09/30/1994 462.71 16.93
12/31/1994 459.27 15.01
03/31/1995 500.71 15.38
06/30/1995 544.75 15.82
09/30/1995 584.41 16.61
12/31/1995 615.93 18.14
03/31/1996 645.50 18.96
06/30/1996 670.63 19.21
09/30/1996 687.33 19.09
12/31/1996 740.74 19.13
03/31/1997 757.12 18.82
06/30/1997 885.14 21.83
09/30/1997 947.28 23.31
12/31/1997 970.43 24.43
03/31/1998 1101.75 27.86
06/30/1998 1133.84 29.10
09/30/1998 1017.01 26.70
12/31/1998 1229.23 32.60
03/31/1999 1286.37 33.52
06/30/1999 1372.71 33.46
09/30/1999 1282.71 29.18
12/31/1999 1469.25 30.50
03/31/2000 1498.58 29.41
06/30/2000 1454.60 28.02
09/30/2000 1436.51 26.75
12/31/2000 1320.28 26.41
03/31/2001 1160.33 25.54
06/30/2001 1224.38 33.28
09/30/2001 1040.94 36.77
12/31/2001 1148.08 46.50
03/31/2002 1147.39 46.45
06/30/2002 989.81 37.02
09/30/2002 815.28 27.14
12/31/2002 879.82 31.89
03/31/2003 848.18 27.97
06/30/2003 974.50 28.21
09/30/2003 995.97 25.82
12/31/2003 1111.92 22.81
03/31/2004 1126.21 21.66
06/30/2004 1140.84 20.32
09/30/2004 1114.58 19.29
12/31/2004 1211.92 20.70
03/31/2005 1180.59 19.57
06/30/2005 1191.33 18.80
09/30/2005 1228.81 18.46
12/31/2005 1248.29 17.85
03/31/2006 1294.83 17.82
06/30/2006 1270.20 17.05
09/30/2006 1335.85 17.00
12/31/2006 1418.30 17.40
03/31/2007 1420.86 17.09
06/30/2007 1503.35 17.70
09/30/2007 1526.75 19.42
12/31/2007 1468.36 22.19
03/31/2008 1322.70 21.90
06/30/2008 1280.00 24.92
09/30/2008 1166.36 25.38
12/31/2008 903.25 60.70
03/31/2009 797.87 116.31
06/30/2009 919.32 122.41

4Q 2009 P/E will likely pop 200.

Objective Conclusion:
The S&P 500 must fall 90% to 95% to reach a price equivalent to 1988 (as far back as S&P's web xls goes). But 1988 represented a valuation in a reasonably strong economic environment, which we do not have today. In 1932, which had much higher Treasury interest rates (the best measure of economic growth expectation) than today, P/E bottomed at 6. To reach that valuation, the S&P must drop by 97% or more, assuming earnings do not deflate at all while the index price falls to almost 0.

6 comments:

  1. Nice set of numbers but can we please have some more discussion and shots of Cashzilla? Up over 6% in the last thirty and still getting no respect! I guess the bashers, shorts and bugs figure if they just ignore it long enough their inflation/hyperinflation, gold to the moon "thesis" will remain intact. Nice to see some "bull****" capital getting burned up for a change as the knives keep falling. Things should get really interesting when the SP500 "cleaver" finally falls out of the drawer.

    ReplyDelete
  2. I think I might go long in lead and lead propulsion systems. My first thought of the S&P dropping 90% is, 'will the Republic survive?'

    ReplyDelete
  3. With bonds heading lower and the dollar and equities heading higher, I assume we should see gold continue lower while the world economies continue to pick up momentum. I see that home prices edged higher and retail sales are better than anyone expected. What indicator is your favorite in determing when the FED has crushed deflation? Many things in my neighborhood have been going up in price lately. Even Jimmy Johns sandwhich shop raised their prices 25%, that is a large increase. I know the text book says deflation but we are awash in cash coming from somewhere.

    ReplyDelete
  4. "I see that home prices edged higher and retail sales are better than anyone expected."

    That's exactly the same news they floated in late 2007.

    "What indicator is your favorite in determing when the FED has crushed deflation?"

    There is only one: the return of borrower demand for paper cash. That is, when we have sustained (several years of) Fed interest rates in the 4-6% range and the 3M T-Bill yields slightly higher. Until then, there is deflation.

    ReplyDelete
  5. FDR- the yield curve is rising hard. Are the bond players finally realizing what the equity players have been forecasting, a strong recovery in the economy for 2010? Stocks look expensive on yesterdays news but companies are very lean now and a 1% drop in the unemployment rate should get earnings above their old highs and thus their stock prices.

    ReplyDelete
  6. Gold miners just lifted their head off the canvas for the first time in a couple weeks!

    Quite a brawl with Cashzilla

    ReplyDelete

The USA's political-economc system is best described as:

On Nov 2, 2010, I plan to vote (FOR or AGAINST) my incumbent congressman

 
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