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P/E Ratio is lower than 1991 to 2010????

Saw this off Crossing Wallstreet, a blog on buy and hold investing. Is this for real?


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Friday 21st of September 2012

Ed Esterling looks back at how the market got here today and then gives a very compelling prognosis of what is the likely scenario going forward. Below are just a short glimpse of what I got from his book 'Probable Outcomes' and the regular update he provides at his website Crestmont Research.

Scenario 1: Another deep and sharp correction in the near term to bring the market to down to a level where the P/E can start to expand for the next secular bull cycle.

Scenario 2: Another decade of gradual decline or lateral sideways movement with many cyclical bull in between like what we are witnessing now.

Which one will pan out will much depend on whether the Fed and EU policy actions are able to keep the market stable at current low inflation. If either inflation or deflation start to take root then Scenario 1 is likely. The key is the current market conditions are not ripe for a sustainable secular bull market to form.

Note: I've attached the article to your email.


Wednesday 19th of September 2012

Even though the P/E now is lower than that in 1991, I find that it is still too high..


Wednesday 19th of September 2012

Ed Esterling who founded Crestmont Research has a very interesting approach towards understanding P/E Ratio and market cycles. According to him the current market P/E (adjusted based on a method that combines Robert Schiller and Ed Esterling approach) is hovering at a level where all the past major Bear starts and Bull ends. The market is not ripe for a secular bull market anytime soon. If you look at his charts we are likely experiencing a cyclical bull in a prolong Bear.


Friday 21st of September 2012

thanks for sharing guys. Swinger, do you think we will dip below the 2008 lows?


Tuesday 18th of September 2012

Hi, this is indeed surprising. Do you think you can verify it by checking the average PE of this period? If the PE is really so low at this juncture, maybe it is good time to pour some money into the US index fund. Regards, CS

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