The slump has made stocks cheap by historical standards

[grapejelly]

That's what a Bloomberg article (http://www.bloomberg.com/apps/news?pid=20601087&sid=a8g9S4628Mkw&refer=worldwide) says speaking of ex-US stock markets "plummeting" today (Monday, Martin Luther King day in the USA)


The slump has made stocks cheap by historical standards. Europe's Stoxx 600 is valued at 11.1 times its companies' profits, the lowest since at least 2002, according to data compiled by Bloomberg. The 1,953-member MSCI World has a price- earnings ratio of 14.3, the cheapest since at least 1998.

What do you say?

[jk]

i say that profits are 1. at historical highs, 2. a mean-reverting series. therefore stocks are not cheap. you need to look at the price versus either peak earnings [like hussman] or 10-yr average earnings [like shiller]. otherwise pe's look too low at earnings peaks, and too high at earnings troughs.

[zoog]

That's what a Bloomberg article (http://www.bloomberg.com/apps/news?pid=20601087&sid=a8g9S4628Mkw&refer=worldwide) says speaking of ex-US stock markets "plummeting" today (Monday, Martin Luther King day in the USA)

The slump has made stocks cheap by historical standards. Europe's Stoxx 600 is valued at 11.1 times its companies' profits, the lowest since at least 2002, according to data compiled by Bloomberg. The 1,953-member MSCI World has a price- earnings ratio of 14.3, the cheapest since at least 1998.What do you say?

I say they're trying to get sheeple to buy overvalued stocks before they go down even more.

[c1ue]

I think Finster's dividend based value estimation is much more useful than P/E.

P/E has been for years manipulated by the companies in the stock market via share buybacks; the cheap borrowed money which allowed this to occur is now mostly gone.

In addition, the earnings of most companies are still inflated by the overconsumption patterns of the past 25 years; should a true recession ensue then consumption patterns will revert.

Given the economies of scale and other business friction issues, I'd guesstimate a 10% reduction in consumption would lead to at least twice that in earnings losses.

Greater consumption reduction would asymmetrically reduce profits also.

Thus in my view the hope that stocks are cheap at present is hoping that consumption will not reduce - and in turn begs the question of where/what this spending source is?

[grapejelly]

stocks got around 4% cheaper on ex-US markets today ;)

[Jim Nickerson]

stocks got around 4% cheaper on ex-US markets today ;)

Here's a closer look.

What I'm attempting here, ain't working. So I'll try something else below.

[Jim Nickerson]

In the attachment are the world's stocks, ex-US and the losses incurred today. Rather overwhelming, and it will be interesting to see what happens tonight. The data are from from online.wsj.com

To the left are the low and highs and the 3rd column is where today's close lies within the range between low and high.

The BRIC seem to have been significantly hit a bit more today.

The averages of each region are computed from the percentages in the boxes above each average.

Edit, the dates in the third attachment are wrong. It should be today, except for US which were Friday 1/18/08