Zahl,

Whats the P&E ratio for the S&P 500 for the latest quarter? Just that one alone?

Its still ridiculously high compared with long term historic norms. Do you not agree with that?

Using Standard & Poor’s own website, the P/E ratio for August is around 130.

I also found historical data on the S&P 500 price, dividends, earnings, and P/E ratio on Robert J. Shiller’s website. He calculates the S&P 500 P/E ratio as the ratio of the S&P 500 price level and a 10-year moving average of the earnings data. The result is a P/E ratio of 18 for August.

A 10-year moving average really smooths out the P/E ratio and the last few months of 100+ P/E ratio values are lost in the average. For the purpose of evaluating present value of the S&P 500 a 10-year moving average really isn’t adequate, and instantaneous (monthly) values should be used as reported by Standard & Poor’s.

It's a bit high, but not "historical."
http://www.multpl.com/

Look I understand the idea behind looking at the numbers with inflation in mind, I surely do. But, your missing the point about valuations in this immediate environment. Once again your failing to understand the context. These PE's are indicating one thing and one thing only RIGHT NOW. You can spin this however you want but viewing this in the light of historical inflation is completely wrong.

Typical of your style OF. Typical.

* DECEMBER 31, 2009, 5:30 P.M. ET
Dow Finishes 2009 With Nearly 19% Gain
By PETER A. MCKAY And DONNA KARDOS YESALAVICH

A late burst of selling left stocks with a hefty loss Thursday at the end of what was otherwise a banner year, highlighted by the biggest annual percentage gain in the Dow Jones Industrial Average in six years.

The Dow ended near its intraday lows, down 120.46 points, or 1.1%, at 10428.05. The blue-chip measure ended 2009 with an 18.8% gain, though it is still down 26.4% from its all-time record set in October 2007.

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No one's posted here in over a month so maybe it's time for a year-end recap.

>>> Dow Finishes 2009 With Nearly 19% Gain <<<

Data for the full U.S. common market:

Worst year on record for dividends (from 1955)
Fewest increases: 1,191 increases is a drop of 36.4% from the 1,874 of 2008, and a 52.6% decline from the 2,513 of 2007
Most decreases: 804 decreases is a 631% gain over the 110 decreases of 2007
Domestic dividend cuts cost investors $58 billion in 2009, which will reduce future payments for year
It will take to 2012-2013 to just get back to 2007-2008

Jan. 21 (Bloomberg) -- Stocks plunged, erasing the Dow Jones Industrial Average’s gain for the year, and Treasuries rose as President Barack Obama proposed limiting risk-taking at banks and concern grew that China will do more to cool its economy. Oil slid as gasoline supplies grew more than forecast.

The Standard & Poor’s 500 Index sank as much as 2 percent at 1:58 p.m. in New York, its biggest loss since November, as financial shares slid 2.7 percent as a group.

Jan. 22 (Bloomberg) -- Japanese stocks plunged as part of a global rout after a U.S. government proposal to ban banks from investing in hedge funds triggered declines in U.S. shares, the dollar and commodities.

The Nikkei 225 Stock Average fell 3 percent to 10,543.02 as of 10:29 a.m. in Tokyo, erasing this year’s advance. The broader Topix index sank 2.3 percent to 934.09, with all 33 of its industry groups retreating.

“The new U.S. regulations, if implemented, will decrease investment in risk assets,” said Kazuhiro Takahashi, a general manager at Daiwa Securities Capital Markets Co. in Tokyo. “The markets for stocks, foreign exchange and commodities will shrink as a result.”

Happy friday everywhere as i write this! . In USA DOW 9835

Credit specialists at Citi are considering launching the first derivatives intended to pay out in the event of a financial crisis. The firm has drawn up plans for a tradable liquidity index, known as the CLX, on which products could be structured that allow buyers to hedge a spike in funding costs.

Like the untraded US rates liquidity index (USRLI), the CLX is constructed as a sum of the Sharpe ratio – deviations from the mean divided by volatility – of various market factors, such as equity volatilities, Treasury rates, swap spreads, corporate bond swaption-implied volatilities, and structured credit spreads. Citi will make the CLX tradable by using fixed historical values for the mean and volatility parameters, eliminating the need for costly recomputation from lengthy time series.
Although the design of the index serves as a proxy measure for liquidity, Terry Benzschawel, a managing director of quantitative credit trading strategy at Citi in New York and head of the team researching the product, says it also tracks more traditional measures such as bid-ask spreads, trading volumes and the USRLI. He compares the potential impact of CLX to that of the interest rate swaps market.

"The great thing about the index is that it hedges your funding costs while being very simple to trade. I believe it will reduce the systemic risk in the industry, akin to how the advent of swaps means people don't worry about interest-rate exposures any more – they just pay a fee to hedge it," he says.

Like a swap, the contracts envisaged by Citi would be entered into without an up-front premium, with money changing hands according to the index's movements around a fair strike value.

I want to finish off with some longer terms messages:

- the Big Reality over the next 3/5 yrs, esp. in the bad balance sheet countries - the UK, the US, Japan, big parts of Europe - is a long period of balance sheet repair which will mean weaker growth for longer, deflation, weaker incomes, softer employment outlooks, more savings, more taxes, and less spending.

There is NO sustainable private sector demand, and there really won't be any for some yrs.

- delusion no.1 is that these economies will devalue and export there way out of trouble. This seems a nonsense to me as EVERYONE is looking to devalue (a race to nowhere) and EVERYONE is looking to export, but to whom??

- delusion no.2 is that we can inflate away our debts. This can ONLY wrk successfully if such a policy of inflation is unanticipated, as otherwise it gets pre-emptively priced into inflation expectations. So it has already failed as AT LEAST half the mrkts see/expect this as the attempted way out.

- delusion no.3 is that governments can keep pumping/printing/borrowing, without consequence, and for long enough to hide the private sector deleveraging/deflationary trends. Those limits are pretty much already with us (Greece), or are soon to be with us give or take a few mths (in the UK), or at best give or take a few qtrs (in the case of the US). On the basis that prvte sector weakness is a multi-yr trend, government is NOT gonna be the solution and will become/is now part of the problem as austerity kicks in (Greece 'done', UK in a few mths, then the US later this year).

- delusion no.4 is 'the weather'. What a load of tosh. Frankly I am shocked the 'mrkt' collectively has fallen for this rubbish.

Anyway, due to the above 4 delusions the mrkt - as ever dominated by FEAR and GREED - is already badly mispricing the Big Reality and risks taking this mispricing YET AGAIN to horrible bubble proportions over the next few weeks/mths. YES - we have learnt nothing!

At some point the bubble will burst. Hopefully for ALL our sakes its sooner rather than later. The longer we are forced to wait, the bigger the bubble will be and the more horribly damaging the bursting process will be. And if we are forced to wait and the bubble gets anywhere like the one that went pop in late 2007 I have ZERO idea who will credibly be able to bail us all out the next time round. Certainly not OUR governments.

The gap between the fantasy in mrkts, which is being heavily touted by most of the sell-side, vs the reality of the real economy/private-sector, is already worryingly large but risks becoming dangerously large.

Pisani: Technical Analysis Is Bullish
Published: Monday, 8 Mar 2010 | 2:57 PM ET
By: Bob Pisani
CNBC Reporter

Seems slow, but there is underlying strength here. New highs in the Nasdaq, mid-cap, and small-cap indices. More optimism on Europe.

As we move into the anniversary of the March 2009 low, Lowry — the oldest technical analysis service — reminds us that, despite the better than 60 percent advance in the S&P 500 from the lows, there is "none of the signs usually associated with a maturing or aging advance. Whatever indications exist of a possibly weakening rally appear to be strictly short-term in nature."

They note that:

1) buying power (Demand) remains strong, while selling pressure (Supply) has been falling; these combined events are associated with a rising, not declining, trend.

2) Advance/decline lines are hitting new highs; this too is associated with continuing advances; a deterioration in the A/D line has typically preceded most market tops.

3) new highs, rather than declining, have been advancing and are near their October peaks.

This being technical analysis, they do note that "most short-term price momentum indicators are currently at levels that have corresponded with prior minor market tops."

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