28-Aug-15 World View -- Explanation of Price/Earnings ratio and Stock Valuations

Discussion of Web Log and Analysis topics from the Generational Dynamics web site.
John
Posts: 11479
Joined: Sat Sep 20, 2008 12:10 pm
Location: Cambridge, MA USA
Contact:

28-Aug-15 World View -- Explanation of Price/Earnings ratio and Stock Valuations

Post by John »

28-Aug-15 World View -- Explanation of Price/Earnings ratio and Stock Valuations

Discovery of decomposing corpses worsens Europe's migrant crisis

** 28-Aug-15 World View -- Explanation of Price/Earnings ratio and Stock Valuations
** http://www.generationaldynamics.com/pg/ ... tm#e150828



Contents:
Discovery of decomposing corpses worsens Europe's migrant crisis
Commemorating the Kellogg-Briand pact that outlawed war
Explanation of Price/Earnings ratio and Stock Valuations


Keys:
Generational Dynamics, Germany, Angela Merkel, Balkan countries,
Austria, Vienna, Schengen Agreement, Dublin Regulation,
Greece, Italy, Kellogg-Briand pact, Japan, Frank B Kellogg,
Price/Earnings ratio, stock valuations, Law of Mean Reversion,
trailing earnings, forward earnings, operating earnings,
Jeremy Siegel, Wharton School, Robert J. Shiller, Yale University

digitalcolony
Posts: 2
Joined: Thu Aug 27, 2015 10:48 pm

Re: 28-Aug-15 World View -- Explanation of Price/Earnings ratio and Stock Valuations

Post by digitalcolony »

PE Ratios are often higher in times of low interest rates and low inflation, which we have both right now. Wouldn't a higher PE be justified in a deflationary environment?

John
Posts: 11479
Joined: Sat Sep 20, 2008 12:10 pm
Location: Cambridge, MA USA
Contact:

Re: 28-Aug-15 World View -- Explanation of Price/Earnings ratio and Stock Valuations

Post by John »

digitalcolony wrote: > PE Ratios are often higher in times of low interest rates and low
> inflation, which we have both right now. Wouldn't a higher PE be
> justified in a deflationary environment?
I don't know what you mean by "justified." It sounds like you're
making a "this time it's different" argument.

When interest rates are low, then investors borrow money at low
interest rates and pour it into the stock market, pushing up the P/E
ratio and making the stock market bubble larger. So low interest
rates are part of the problem, rather than being a justification.

The big, endless debate on CNBC these days -- almost the only thing
they can talk about -- is when the Fed is going to raise interest
rates. Raising the interest rates would force investors to sell
stocks to pay off their debts, and that could trigger the inevitable
panic.

something different

Re: 28-Aug-15 World View -- Explanation of Price/Earnings ratio and Stock Valuations

Post by something different »

If you want to know about the future of the West, I suggest reading this book:

Image

digitalcolony
Posts: 2
Joined: Thu Aug 27, 2015 10:48 pm

Re: 28-Aug-15 World View -- Explanation of Price/Earnings ratio and Stock Valuations

Post by digitalcolony »

Perhaps justified is the wrong word. Maybe understandable.

This time is different in a sense we now have a global economy with all major central bankers following ZIRP. I think discussions involving PE Ratio that don't look at interest rates are missing an important variable. I don't think we get to low PE Ratios unless inflation gets out of hand and interest rates rise.

There are so many deflationary pressures now, I can see average to above average PE Ratios for years to come.

There was a good EconTalk interview on Interest Rates recently. Besides central bankers there are a lot of other pressures keeping interest rates low.
http://www.econtalk.org/archives/2015/0 ... er_on.html

Jack Edwards
Posts: 117
Joined: Sun Jun 28, 2009 1:47 pm

Re: 28-Aug-15 World View -- Explanation of Price/Earnings ratio and Stock Valuations

Post by Jack Edwards »

digitalcolony
This time is different in a sense we now have a global economy with all major central bankers following ZIRP. I think discussions involving PE Ratio that don't look at interest rates are missing an important variable. I don't think we get to low PE Ratios unless inflation gets out of hand and interest rates rise.
When I read that, I can't help think of a great short story written by one of the forum posters here: http://gdxforum.com/forum/viewtopic.php?f=10&t=85#p2026

One of the ideas of generational dynamics is that history doesn't repeat itself, but it does rhyme. The idea that "this time is different", really doesn't wash.

I encourage you and anyone that hasn't, to read that wonderful story.

Regards Jack

gerald
Posts: 1681
Joined: Sat May 02, 2009 10:34 pm

Re: 28-Aug-15 World View -- Explanation of Price/Earnings ratio and Stock Valuations

Post by gerald »

hmmm--- maybe not related --- but an observation. Spent the last few weeks, traveling and watching TV where possible, I don't have TV , consider it a waste of time.

The observation --- While watching the various antics of Trump, the media and "contenders" It struck me that Trump could be like Alexander the great and the Gordian Knot ( The Gordian Knot is a legend of Phrygian Gordium associated with Alexander the Great. It is often used as a metaphor for an intractable problem (disentangling an "impossible" knot) solved easily by cheating or "thinking outside the box" ("cutting the Gordian knot"))
https://en.wikipedia.org/wiki/Gordian_Knot

Hmmm

MarvyGuy

Re: 28-Aug-15 World View -- Explanation of Price/Earnings ratio and Stock Valuations

Post by MarvyGuy »

How can a guy that builds huge towers and puts his name on them be trusted (and has that psychopath Hillery seated front row during his 3rd wedding). It is all a big show. US will wind up somewhere between UK surveillance state and South Africa or perhaps Zimbabwe. BO and the GenX hordes have systematically destroyed the US over 7+ years and there will be no turning back the clock now. US is on track for the French Revolution redux (proto Marxist).

Quo Vadis

Guest

Re: 28-Aug-15 World View -- Explanation of Price/Earnings ratio and Stock Valuations

Post by Guest »

MarvyGuy wrote:How can a guy that builds huge towers and puts his name on them be trusted (and has that psychopath Hillery seated front row during his 3rd wedding). It is all a big show. US will wind up somewhere between UK surveillance state and South Africa or perhaps Zimbabwe. BO and the GenX hordes have systematically destroyed the US over 7+ years and there will be no turning back the clock now. US is on track for the French Revolution redux (proto Marxist).

Quo Vadis
America is on track to become an extension of Mexico: a narco drug state where robbery, kidnapping, rape and murder are as common as sunlight. The liberalism of the boomers and many of their politically correct offspring has born fruit and everyone is eating it now. The West is on track to become a giant third world slum-that's all. Nothing more. Anyone with common sense (and enough money) is heading for the life boats (emigrating).

The revolution redux will be racial genocide. The white population has become so PC, I wonder if they will even fight back, even when their loved ones were being slaughtered in front of them. I really do wonder...

gerald
Posts: 1681
Joined: Sat May 02, 2009 10:34 pm

Re: 28-Aug-15 World View -- Explanation of Price/Earnings ratio and Stock Valuations

Post by gerald »

Guest wrote:
MarvyGuy wrote:How can a guy that builds huge towers and puts his name on them be trusted (and has that psychopath Hillery seated front row during his 3rd wedding). It is all a big show. US will wind up somewhere between UK surveillance state and South Africa or perhaps Zimbabwe. BO and the GenX hordes have systematically destroyed the US over 7+ years and there will be no turning back the clock now. US is on track for the French Revolution redux (proto Marxist).

Quo Vadis
America is on track to become an extension of Mexico: a narco drug state where robbery, kidnapping, rape and murder are as common as sunlight. The liberalism of the boomers and many of their politically correct offspring has born fruit and everyone is eating it now. The West is on track to become a giant third world slum-that's all. Nothing more. Anyone with common sense (and enough money) is heading for the life boats (emigrating).

The revolution redux will be racial genocide. The white population has become so PC, I wonder if they will even fight back, even when their loved ones were being slaughtered in front of them. I really do wonder...

If one leaves the coastal urban cities and a few other urban centers, one can enter a different world, where you can go to a gun show and see men and women with "golf bags" containing rifles and live ammo. Where you can play with a Gatling gun using live ammo, see the American flag, read the constitution, bill of rights, see the flag of "don't tread on me" or "liberty or death", etc. Don't forget the mainstream media is controlled by a few in the coastal cities including Washington DC. --- Example from Rush Limbaugh who has a respectable audience of at least 10 million + so as said http://www.rushlimbaugh.com/daily/2015/ ... _they_hate

"GOP Elites Struggle to Comprehend Trump's Appeal to the Base They Hate"

"Peggy Noonan, for lack of a better way of mentioning it, is part of this ruling class in Washington. That is her world, and it always has been."

So Peggy left Washington recently. She's been out there talking to you, people like you, and she has been shocked at what she found. And she's now a believer. She thinks what's happening outside Washington's real. The way she describes it today is, "America is in play," meaning all of this support for Trump.

But more than that, all of this opposition to the fixtures of Washington is real. It's not fringe. It's not tiny. It's not made up of kooks. It is more and more mainstream, and she has been stunned! She writes that she's stunned to learn that there are Hispanics that feel this way and that there are African-Americans who feel this way, and that there are blacks and Latinos and Asians and you name it.

In other words: Inside the Beltway they think all of this anti-Washington stuff is a bunch of conservative fringe kooks. Peggy went out there -- she's been talking to people, she's traveled the country -- and she's found out that every demographic under the sun is represented by these people who are unhappy with the leadership that they're getting in all of Washington. Not just Republicans, not just Democrats, but the whole shebang."
--------------------------------------------

I live in flyover country and here there are bill boards and ads in local papers for fire arm training and concealed carry for men and women. in some of the gun shops you here complaints regarding a shortage of ammo.

-----------------------------------------------

This division between the "capital" and the rest of the country exists elsewhere, such as, Paris vs. France and Buenos Aires vs. Argentina.

hmmmm

Post Reply

Who is online

Users browsing this forum: No registered users and 51 guests