The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

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millennialinvestor
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The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by millennialinvestor »

My guess is likely 45 plus. Biggest in US history. New accounting rules have caused the PEs to decrease. Just look at Berkshire Hathaway.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by TigerNest »

I suspect it has much more to do with low interest rates.

An expected stock return of 8% looks a lot better if the alternative is bonds that are yielding 1% vs. 7%.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by alex_686 »

It would have to be lower. The changes to accounting rules are favorable to intangible assets.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Lee_WSP »

millennialinvestor wrote: Sat Jun 12, 2021 5:34 pm My guess is likely 45 plus. Biggest in US history. New accounting rules have caused the PEs to decrease. Just look at Berkshire Hathaway.
https://www.multpl.com/s-p-500-pe-ratio

Correct. 45
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by millennialinvestor »

Lee_WSP wrote: Sat Jun 12, 2021 5:46 pm
millennialinvestor wrote: Sat Jun 12, 2021 5:34 pm My guess is likely 45 plus. Biggest in US history. New accounting rules have caused the PEs to decrease. Just look at Berkshire Hathaway.
https://www.multpl.com/s-p-500-pe-ratio

Correct. 45
That link says the PE was only 25 in Jan. 2020. Crazy year and a half...
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Lee_WSP »

millennialinvestor wrote: Sat Jun 12, 2021 6:07 pm
Lee_WSP wrote: Sat Jun 12, 2021 5:46 pm
millennialinvestor wrote: Sat Jun 12, 2021 5:34 pm My guess is likely 45 plus. Biggest in US history. New accounting rules have caused the PEs to decrease. Just look at Berkshire Hathaway.
https://www.multpl.com/s-p-500-pe-ratio

Correct. 45
That link says the PE was only 25 in Jan. 2020. Crazy year and a half...
As Bogle would've said, the market is full of donut-y speculation.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by SkyWasYellow »

Thea earnings data only goes to December 2020. But the price appears to be current. I would love to know what earnings have been so far in 2021.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by mrspock »

millennialinvestor wrote: Sat Jun 12, 2021 5:34 pm My guess is likely 45 plus. Biggest in US history. New accounting rules have caused the PEs to decrease. Just look at Berkshire Hathaway.
Nothing burger. Interest rates are at 0%. Call me when we get back to 5-6% with a PE of 36.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Nathan Drake »

mrspock wrote: Sat Jun 12, 2021 7:18 pm
millennialinvestor wrote: Sat Jun 12, 2021 5:34 pm My guess is likely 45 plus. Biggest in US history. New accounting rules have caused the PEs to decrease. Just look at Berkshire Hathaway.
Nothing burger. Interest rates are at 0%. Call me when we get back to 5-6% with a PE of 36.
Nothing burger?

Interest rates are lower internationally with substantially smaller P/E.

Are exUS stocks an amazing value or are US stocks absurdly overvalued?
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by dziuniek »

Nathan Drake wrote: Sat Jun 12, 2021 11:02 pm
mrspock wrote: Sat Jun 12, 2021 7:18 pm
millennialinvestor wrote: Sat Jun 12, 2021 5:34 pm My guess is likely 45 plus. Biggest in US history. New accounting rules have caused the PEs to decrease. Just look at Berkshire Hathaway.
Nothing burger. Interest rates are at 0%. Call me when we get back to 5-6% with a PE of 36.
Nothing burger?

Interest rates are lower internationally with substantially smaller P/E.

Are exUS stocks an amazing value or are US stocks absurdly overvalued?
Both could be true, or not.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by mrspock »

Nathan Drake wrote: Sat Jun 12, 2021 11:02 pm
mrspock wrote: Sat Jun 12, 2021 7:18 pm
millennialinvestor wrote: Sat Jun 12, 2021 5:34 pm My guess is likely 45 plus. Biggest in US history. New accounting rules have caused the PEs to decrease. Just look at Berkshire Hathaway.
Nothing burger. Interest rates are at 0%. Call me when we get back to 5-6% with a PE of 36.
Nothing burger?

Interest rates are lower internationally with substantially smaller P/E.

Are exUS stocks an amazing value or are US stocks absurdly overvalued?
The market begs to differ. So far it’s been international that’s been overvalued for quite a while.

Complete utter, total, fulsome nothing burger. Sort of like the 22 day market crash last year (not equating to the pandemic, this obviously wasn’t), and whatever one comes next. Yawn.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Nathan Drake »

mrspock wrote: Sat Jun 12, 2021 11:30 pm
Nathan Drake wrote: Sat Jun 12, 2021 11:02 pm
mrspock wrote: Sat Jun 12, 2021 7:18 pm
millennialinvestor wrote: Sat Jun 12, 2021 5:34 pm My guess is likely 45 plus. Biggest in US history. New accounting rules have caused the PEs to decrease. Just look at Berkshire Hathaway.
Nothing burger. Interest rates are at 0%. Call me when we get back to 5-6% with a PE of 36.
Nothing burger?

Interest rates are lower internationally with substantially smaller P/E.

Are exUS stocks an amazing value or are US stocks absurdly overvalued?
The market begs to differ. So far it’s been international that’s been overvalued for quite a while.

Complete utter, total, fulsome nothing burger. Sort of like the 22 day market crash last year (not equating to the pandemic, this obviously wasn’t), and whatever one comes next. Yawn.
That’s not how “valuation” works. If something is overvalued it means that it’s performance has done better than fundamentals suggest and will likely have a lower equity premium in the future
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Lee_WSP »

Stay the course has turned into a litmus test around here. Posters forget that Bogle himself said that lowering equities in the face of extreme speculation (high P/E) is prudent.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by JBTX »

mrspock wrote: Sat Jun 12, 2021 11:30 pm
Nathan Drake wrote: Sat Jun 12, 2021 11:02 pm
mrspock wrote: Sat Jun 12, 2021 7:18 pm
millennialinvestor wrote: Sat Jun 12, 2021 5:34 pm My guess is likely 45 plus. Biggest in US history. New accounting rules have caused the PEs to decrease. Just look at Berkshire Hathaway.
Nothing burger. Interest rates are at 0%. Call me when we get back to 5-6% with a PE of 36.
Nothing burger?

Interest rates are lower internationally with substantially smaller P/E.

Are exUS stocks an amazing value or are US stocks absurdly overvalued?
The market begs to differ. So far it’s been international that’s been overvalued for quite a while.

Complete utter, total, fulsome nothing burger. Sort of like the 22 day market crash last year (not equating to the pandemic, this obviously wasn’t), and whatever one comes next. Yawn.
A PE of 45 is a nothing burger. Interesting. Is there a PE where it becomes a something burger?
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by mrspock »

JBTX wrote: Sat Jun 12, 2021 11:50 pm
mrspock wrote: Sat Jun 12, 2021 11:30 pm
Nathan Drake wrote: Sat Jun 12, 2021 11:02 pm
mrspock wrote: Sat Jun 12, 2021 7:18 pm
millennialinvestor wrote: Sat Jun 12, 2021 5:34 pm My guess is likely 45 plus. Biggest in US history. New accounting rules have caused the PEs to decrease. Just look at Berkshire Hathaway.
Nothing burger. Interest rates are at 0%. Call me when we get back to 5-6% with a PE of 36.
Nothing burger?

Interest rates are lower internationally with substantially smaller P/E.

Are exUS stocks an amazing value or are US stocks absurdly overvalued?
The market begs to differ. So far it’s been international that’s been overvalued for quite a while.

Complete utter, total, fulsome nothing burger. Sort of like the 22 day market crash last year (not equating to the pandemic, this obviously wasn’t), and whatever one comes next. Yawn.
A PE of 45 is a nothing burger. Interesting. Is there a PE where it becomes a something burger?
When interest rates normalize. This is a multi-dimensional problem, the surrounding context matters. PEs alone are useless.

But I’m all ears. What’s the alternate play here? Bonds? Bit coin? International equities? Market timing? Russian bearer bonds? All of the above?
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by JBTX »

mrspock wrote: Sat Jun 12, 2021 11:55 pm
JBTX wrote: Sat Jun 12, 2021 11:50 pm
mrspock wrote: Sat Jun 12, 2021 11:30 pm
Nathan Drake wrote: Sat Jun 12, 2021 11:02 pm
mrspock wrote: Sat Jun 12, 2021 7:18 pm

Nothing burger. Interest rates are at 0%. Call me when we get back to 5-6% with a PE of 36.
Nothing burger?

Interest rates are lower internationally with substantially smaller P/E.

Are exUS stocks an amazing value or are US stocks absurdly overvalued?
The market begs to differ. So far it’s been international that’s been overvalued for quite a while.

Complete utter, total, fulsome nothing burger. Sort of like the 22 day market crash last year (not equating to the pandemic, this obviously wasn’t), and whatever one comes next. Yawn.
A PE of 45 is a nothing burger. Interesting. Is there a PE where it becomes a something burger?
When interest rates normalize. This is a multi-dimensional problem, the surrounding context matters. PEs alone are useless.
So at current interest rates, is there a PE that becomes a somethjng burger? 60? 80? 100?
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by JBTX »

mrspock wrote: Sat Jun 12, 2021 11:55 pm
But I’m all ears. What’s the alternate play here? Bonds? Bit coin? International equities? Market timing? Russian bearer bonds? All of the above?
International, ibonds, eebonds, tips, scv, bonds, etc, REITS, gold silver, in addition to US stocks.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Lee_WSP »

JBTX wrote: Sat Jun 12, 2021 11:58 pm
mrspock wrote: Sat Jun 12, 2021 11:55 pm
JBTX wrote: Sat Jun 12, 2021 11:50 pm
mrspock wrote: Sat Jun 12, 2021 11:30 pm
Nathan Drake wrote: Sat Jun 12, 2021 11:02 pm

Nothing burger?

Interest rates are lower internationally with substantially smaller P/E.

Are exUS stocks an amazing value or are US stocks absurdly overvalued?
The market begs to differ. So far it’s been international that’s been overvalued for quite a while.

Complete utter, total, fulsome nothing burger. Sort of like the 22 day market crash last year (not equating to the pandemic, this obviously wasn’t), and whatever one comes next. Yawn.
A PE of 45 is a nothing burger. Interesting. Is there a PE where it becomes a something burger?
When interest rates normalize. This is a multi-dimensional problem, the surrounding context matters. PEs alone are useless.
So at current interest rates, is there a PE that becomes a somethjng burger? 60? 80? 100?
While I wouldn't and don't use the term nothing burger, the alternatives are very unattractive.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by JoMoney »

The energy sector had negative earnings in every quarter of 2020, other areas while maybe not negative took an earnings dive. If you're looking at trailing earnings for your P/E ratio you might be missing that forward expectations are for something better than 2020, and it doesn't take much to be better than 2020 :wink:

Aside from earnings though, even the 'Book Value' multiples are relatively high... but then again, the tech heavy boom might explain some of that, the IT sector isn't big for heavy capital investment in 'property and plant' and things of 'book value'.
Last edited by JoMoney on Sun Jun 13, 2021 12:35 am, edited 1 time in total.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by ivgrivchuck »

Lee_WSP wrote: Sat Jun 12, 2021 11:49 pm Stay the course has turned into a litmus test around here. Posters forget that Bogle himself said that lowering equities in the face of extreme speculation (high P/E) is prudent.
True. I believe it was in the dot-com bubble when he personally went from 75% equity AA to around 35%. Quite a market timer he was indeed 8-)
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Lee_WSP »

ivgrivchuck wrote: Sun Jun 13, 2021 12:34 am
Lee_WSP wrote: Sat Jun 12, 2021 11:49 pm Stay the course has turned into a litmus test around here. Posters forget that Bogle himself said that lowering equities in the face of extreme speculation (high P/E) is prudent.
True. I believe it was in the dot-com bubble when he personally went from 75% equity AA to around 35%. Quite a market timer he was indeed 8-)
He certainly was, but he seems to have also decided that he'd won the game so thoroughly that he'd quit permanently at that point. He was quite long in years, but still went on to predict a similar crash around 2006/2007. But he would usually or always add the caveat that markets can stay overpriced for a while before reverting to the mean.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Nathan Drake »

Lee_WSP wrote: Sun Jun 13, 2021 12:24 am
JBTX wrote: Sat Jun 12, 2021 11:58 pm
mrspock wrote: Sat Jun 12, 2021 11:55 pm
JBTX wrote: Sat Jun 12, 2021 11:50 pm
mrspock wrote: Sat Jun 12, 2021 11:30 pm

The market begs to differ. So far it’s been international that’s been overvalued for quite a while.

Complete utter, total, fulsome nothing burger. Sort of like the 22 day market crash last year (not equating to the pandemic, this obviously wasn’t), and whatever one comes next. Yawn.
A PE of 45 is a nothing burger. Interesting. Is there a PE where it becomes a something burger?
When interest rates normalize. This is a multi-dimensional problem, the surrounding context matters. PEs alone are useless.
So at current interest rates, is there a PE that becomes a somethjng burger? 60? 80? 100?
While I wouldn't and don't use the term nothing burger, the alternatives are very unattractive.
Some are much lower valuations, how are they unattractive? Just because they haven’t performed as well?

They have similar expected returns yet are nearly half the price?
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Lee_WSP »

Nathan Drake wrote: Sun Jun 13, 2021 12:51 am
Lee_WSP wrote: Sun Jun 13, 2021 12:24 am
JBTX wrote: Sat Jun 12, 2021 11:58 pm
mrspock wrote: Sat Jun 12, 2021 11:55 pm
JBTX wrote: Sat Jun 12, 2021 11:50 pm

A PE of 45 is a nothing burger. Interesting. Is there a PE where it becomes a something burger?
When interest rates normalize. This is a multi-dimensional problem, the surrounding context matters. PEs alone are useless.
So at current interest rates, is there a PE that becomes a somethjng burger? 60? 80? 100?
While I wouldn't and don't use the term nothing burger, the alternatives are very unattractive.
Some are much lower valuations, how are they unattractive? Just because they haven’t performed as well?

They have similar expected returns yet are nearly half the price?
1) I'd love to see your crystal ball. Expected returns have a way of not meeting expectations one way or the other.

2) even if we accept it as true, which alternatives are you suggesting? Risk adjusted returns are not great across the board.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Nathan Drake »

Lee_WSP wrote: Sun Jun 13, 2021 12:56 am
Nathan Drake wrote: Sun Jun 13, 2021 12:51 am
Lee_WSP wrote: Sun Jun 13, 2021 12:24 am
JBTX wrote: Sat Jun 12, 2021 11:58 pm
mrspock wrote: Sat Jun 12, 2021 11:55 pm

When interest rates normalize. This is a multi-dimensional problem, the surrounding context matters. PEs alone are useless.
So at current interest rates, is there a PE that becomes a somethjng burger? 60? 80? 100?
While I wouldn't and don't use the term nothing burger, the alternatives are very unattractive.
Some are much lower valuations, how are they unattractive? Just because they haven’t performed as well?

They have similar expected returns yet are nearly half the price?
1) I'd love to see your crystal ball. Expected returns have a way of not meeting expectations one way or the other.

2) even if we accept it as true, which alternatives are you suggesting? Risk adjusted returns are not great across the board.
ExUS, EM, SCV
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by mrspock »

JBTX wrote: Sun Jun 13, 2021 12:00 am
mrspock wrote: Sat Jun 12, 2021 11:55 pm
But I’m all ears. What’s the alternate play here? Bonds? Bit coin? International equities? Market timing? Russian bearer bonds? All of the above?
International, ibonds, eebonds, tips, scv, bonds, etc, REITS, gold silver, in addition to US stocks.
So do I pay my 30% capital gains to make all this happen? Do I make this all back plus beat the S&P 500? You see, some of us have nearly everything in taxable so we can’t just shift things around with the flavor of the month without large tax consequences.

Honestly, let’s check back in 10 years and see if market timing based on PE ratios or me just sitting on my hands wins.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Alchemist »

Current PE is not meaningful given the artificially depressed earnings the last 12 months have due to pandemic related shutdowns. Forward PE is much more meaningful. Currently the S&P 500 forward PE for the next 12 months is 22. That means so long as earnings come in as estimated; prices could remain sideways through the end of the year and the current PE would drop from 36 to 22. You could have a 8% gain for the year and 14 point drop in PE.

Everyone forgets that both the "P" and the "E" are variables.
Nathan Drake wrote: Sat Jun 12, 2021 11:02 pm Are exUS stocks an amazing value or are US stocks absurdly overvalued?
Or neither. Maybe exUS stocks are a value trap and US stocks are fairly valued.

So many bogleheads seem convinced that the current market looks like 1999 or 2000. Yet the parallels instead are closer to 2010. The world has gone through a horrific crisis, well capitalized firms (like FANG....) have done very well. The US has responded with aggressive stimulus measures while the Eurozone's response was anemic at best. Meanwhile most EM's (and developed Asia) are facing at least another 6-12 months of dealing with the crisis before they can even think about serious recovery.

Whatever you think of the US market, given the alternatives it seems best set to thrive in the next couple years.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by JBTX »

Alchemist wrote: Sun Jun 13, 2021 2:04 am Current PE is not meaningful given the artificially depressed earnings the last 12 months have due to pandemic related shutdowns. Forward PE is much more meaningful. Currently the S&P 500 forward PE for the next 12 months is 22. That means so long as earnings come in as estimated; prices could remain sideways through the end of the year and the current PE would drop from 36 to 22. You could have a 8% gain for the year and 14 point drop in PE.

Everyone forgets that both the "P" and the "E" are variables.
Nathan Drake wrote: Sat Jun 12, 2021 11:02 pm Are exUS stocks an amazing value or are US stocks absurdly overvalued?
Or neither. Maybe exUS stocks are a value trap and US stocks are fairly valued.

So many bogleheads seem convinced that the current market looks like 1999 or 2000. Yet the parallels instead are closer to 2010. The world has gone through a horrific crisis, well capitalized firms (like FANG....) have done very well. The US has responded with aggressive stimulus measures while the Eurozone's response was anemic at best. Meanwhile most EM's (and developed Asia) are facing at least another 6-12 months of dealing with the crisis before they can even think about serious recovery.

Whatever you think of the US market, given the alternatives it seems best set to thrive in the next couple years.
Forward PES always look much more attractive than historical. The E's aren't even comparable. One is net income the other is operating earnings.

https://insight.factset.com/sp-500-forw ... since-2002
Image

It looks like the peak forward PE in Feb 2000 was 24, so we are approaching that.

Forward esrnings almost always exceed actual earnings. Some pretty interesting stats in here, ignoring it is from seeking alpha and obviously advocating market timing.

Image

https://seekingalpha.com/article/442866 ... -pe-ratios
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by GoneOnTilt »

Nathan Drake wrote: Sat Jun 12, 2021 11:02 pm
mrspock wrote: Sat Jun 12, 2021 7:18 pm
millennialinvestor wrote: Sat Jun 12, 2021 5:34 pm My guess is likely 45 plus. Biggest in US history. New accounting rules have caused the PEs to decrease. Just look at Berkshire Hathaway.
Nothing burger. Interest rates are at 0%. Call me when we get back to 5-6% with a PE of 36.
Nothing burger?

Interest rates are lower internationally with substantially smaller P/E.

Are exUS stocks an amazing value or are US stocks absurdly overvalued?
Maybe both are appropriately valued?
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Nathan Drake »

bck63 wrote: Sun Jun 13, 2021 4:42 am
Nathan Drake wrote: Sat Jun 12, 2021 11:02 pm
mrspock wrote: Sat Jun 12, 2021 7:18 pm
millennialinvestor wrote: Sat Jun 12, 2021 5:34 pm My guess is likely 45 plus. Biggest in US history. New accounting rules have caused the PEs to decrease. Just look at Berkshire Hathaway.
Nothing burger. Interest rates are at 0%. Call me when we get back to 5-6% with a PE of 36.
Nothing burger?

Interest rates are lower internationally with substantially smaller P/E.

Are exUS stocks an amazing value or are US stocks absurdly overvalued?
Maybe both are appropriately valued?
Yes. They could be. If the market is pricing in a “safer” US equities, the expected return based on P/E will be significantly lower
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Lee_WSP »

Nathan Drake wrote: Sun Jun 13, 2021 1:15 am
Lee_WSP wrote: Sun Jun 13, 2021 12:56 am
Nathan Drake wrote: Sun Jun 13, 2021 12:51 am
Lee_WSP wrote: Sun Jun 13, 2021 12:24 am
JBTX wrote: Sat Jun 12, 2021 11:58 pm

So at current interest rates, is there a PE that becomes a somethjng burger? 60? 80? 100?
While I wouldn't and don't use the term nothing burger, the alternatives are very unattractive.
Some are much lower valuations, how are they unattractive? Just because they haven’t performed as well?

They have similar expected returns yet are nearly half the price?
1) I'd love to see your crystal ball. Expected returns have a way of not meeting expectations one way or the other.

2) even if we accept it as true, which alternatives are you suggesting? Risk adjusted returns are not great across the board.
ExUS, EM, SCV
Ex us has a pe of nearly forty or low thirties. Hardly much different. Emerging markets is riskier. And scv seems to have a negative pe.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by SteadyOne »

US is coming out of worst pandemic that led government to forcefully shut down the large part of the economy. The last similar one was in 1918. So, this is as close to ‘now is different’ case as one can get. US has a crisis now of UNDER capacity not overcapacity. People have money but unable to spend it for housing and goods due to supply chains disruptions. Hence, crazy prices on lumber, houses, etc.

We are so lucky that the whole thing did not blow up spectacularly and it could have been very very bad. Actually it demonstrated resiliency and ingenuity of the American business. Switching such a huge portion of business to remote work is short of miracle. Nobody would have believed it couple of years ago.

I remember how bad things seemed to be and were just a year ago. And now people are bidding up large houses 20% or more in nice neighbourhoods and new cars are not staying up at the lots for too long.

I do not see US economy go anywhere but up once supply chains are restored. Then PE will revert to more meaningful number.

I think I just convinced myself to keep buying VIIIX :)
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Nathan Drake »

Lee_WSP wrote: Sun Jun 13, 2021 9:20 am
Nathan Drake wrote: Sun Jun 13, 2021 1:15 am
Lee_WSP wrote: Sun Jun 13, 2021 12:56 am
Nathan Drake wrote: Sun Jun 13, 2021 12:51 am
Lee_WSP wrote: Sun Jun 13, 2021 12:24 am

While I wouldn't and don't use the term nothing burger, the alternatives are very unattractive.
Some are much lower valuations, how are they unattractive? Just because they haven’t performed as well?

They have similar expected returns yet are nearly half the price?
1) I'd love to see your crystal ball. Expected returns have a way of not meeting expectations one way or the other.

2) even if we accept it as true, which alternatives are you suggesting? Risk adjusted returns are not great across the board.
ExUS, EM, SCV
Ex us has a pe of nearly forty or low thirties. Hardly much different. Emerging markets is riskier. And scv seems to have a negative pe.
PE is around 20

And even low 30s is dramatically less than 45

If there’s no risk then there’s no risk premium. If EM is riskier the expected return is higher
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Lee_WSP »

Nathan Drake wrote: Sun Jun 13, 2021 10:03 am

PE is around 20

And even low 30s is dramatically less than 45

If there’s no risk then there’s no risk premium. If EM is riskier the expected return is higher
Which ETF? Per OP's point, the new accounting method paints a much rosier P/E picture.

Let's look at IWM and VBR.

IWM has a negative P/E of -55.97 using the old method: https://www.etf.com/IWM#overview

It has a positive P/E of 22.57 using the new method: https://www.ishares.com/us/products/239 ... l-2000-etf

VBR has a negative P/E of -389.11 using the old method: https://www.etf.com/VBR#overview

And a positive P/E of 18.39 using the new method: https://ycharts.com/companies/VBR


Ex-US contains a lot of emerging market, has a Sharpe Ratio of .29 vs .53 and has historically severely lagged behind the S&P throughout it's 20+ year history with Vanguard. It's clearly a riskier fund. I asked for alternatives that were better on a risk adjusted basis.
Last edited by Lee_WSP on Sun Jun 13, 2021 10:21 am, edited 1 time in total.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Nathan Drake »

Lee_WSP wrote: Sun Jun 13, 2021 10:18 am
Nathan Drake wrote: Sun Jun 13, 2021 10:03 am

PE is around 20

And even low 30s is dramatically less than 45

If there’s no risk then there’s no risk premium. If EM is riskier the expected return is higher
Which ETF? Per OP's point, the new accounting method paints a much rosier P/E picture.

Let's look at IWM and VBR.

IWM has a negative P/E of -55.97 using the old method: https://www.etf.com/IWM#overview

It has a positive P/E of 22.57 using the new method: https://www.ishares.com/us/products/239 ... l-2000-etf

VBR has a negative P/E of -389.11 using the old method: https://www.etf.com/VBR#overview

And a positive P/E of 18.39 using the new method: https://ycharts.com/companies/VBR
It depends on what metric you want to use to determine Earnings. Regardless, they are far less than US TSM

Value stocks have extremely depressed earnings due to COVID; similar to almost everything in 2009 yet that was (in retrospect) a very good time to buy

You can’t use trailing 1 year data with a black swan event to say something is overvalued
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Lee_WSP »

Nathan Drake wrote: Sun Jun 13, 2021 10:20 am
Lee_WSP wrote: Sun Jun 13, 2021 10:18 am
Nathan Drake wrote: Sun Jun 13, 2021 10:03 am

PE is around 20

And even low 30s is dramatically less than 45

If there’s no risk then there’s no risk premium. If EM is riskier the expected return is higher
Which ETF? Per OP's point, the new accounting method paints a much rosier P/E picture.

Let's look at IWM and VBR.

IWM has a negative P/E of -55.97 using the old method: https://www.etf.com/IWM#overview

It has a positive P/E of 22.57 using the new method: https://www.ishares.com/us/products/239 ... l-2000-etf

VBR has a negative P/E of -389.11 using the old method: https://www.etf.com/VBR#overview

And a positive P/E of 18.39 using the new method: https://ycharts.com/companies/VBR
It depends on what metric you want to use to determine Earnings. Regardless, they are far less than US TSM

Value stocks have extremely depressed earnings due to COVID; similar to almost everything in 2009 yet that was (in retrospect) a very good time to buy

You can’t use trailing 1 year data with a black swan event to say something is overvalued
Not true.

https://www.portfoliovisualizer.com/bac ... ion2_2=100

It clearly marches more or less in line with the S&P (even came out of March 2020 in slightly better , which is sort of obvious since they're both representative of the US market.

Unsure if this link will work, but it shows that it's been on a tear vs the S&P.
https://finance.yahoo.com/chart/IWM#eyJ ... J0In19fX0-
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Nathan Drake »

Lee_WSP wrote: Sun Jun 13, 2021 10:24 am
Nathan Drake wrote: Sun Jun 13, 2021 10:20 am
Lee_WSP wrote: Sun Jun 13, 2021 10:18 am
Nathan Drake wrote: Sun Jun 13, 2021 10:03 am

PE is around 20

And even low 30s is dramatically less than 45

If there’s no risk then there’s no risk premium. If EM is riskier the expected return is higher
Which ETF? Per OP's point, the new accounting method paints a much rosier P/E picture.

Let's look at IWM and VBR.

IWM has a negative P/E of -55.97 using the old method: https://www.etf.com/IWM#overview

It has a positive P/E of 22.57 using the new method: https://www.ishares.com/us/products/239 ... l-2000-etf

VBR has a negative P/E of -389.11 using the old method: https://www.etf.com/VBR#overview

And a positive P/E of 18.39 using the new method: https://ycharts.com/companies/VBR
It depends on what metric you want to use to determine Earnings. Regardless, they are far less than US TSM

Value stocks have extremely depressed earnings due to COVID; similar to almost everything in 2009 yet that was (in retrospect) a very good time to buy

You can’t use trailing 1 year data with a black swan event to say something is overvalued
Not true.

https://www.portfoliovisualizer.com/bac ... ion2_2=100

It clearly marches more or less in line with the S&P (even came out of March 2020 in slightly better , which is sort of obvious since they're both representative of the US market.

Unsure if this link will work, but it shows that it's been on a tear vs the S&P.
https://finance.yahoo.com/chart/IWM#eyJ ... J0In19fX0-
What’s not true?

Earnings of small value stocks were hit far harder than big tech and most of the S&P 500
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Lee_WSP »

Nathan Drake wrote: Sun Jun 13, 2021 10:32 am
Earnings of small value stocks were hit far harder than big tech and most of the S&P 500
I thought you were saying something else.

Okay, so you're agreeing that the P/E ratio (the speculative return as Jack Bogle calls it) for SCV is higher than the S&P 500.

This is a truism as I've already shown that SCV price has blown the 500 out of the water since March 2020 and even going back to January 2020 and as you have stated: earnings were hit harder than the 500.

So, putting that together, SCV's price to earnings has relatively skyrocketed along with the price of the basket of stocks.

It's clearly an everything bubble. Perhaps emerging markets is the panacea/vaccine/whatever. I don't know, I can't predict the future. All I know is that it's all very very expensive.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by William Million »

Can't imagine anything more foolish than using PE (or PE10) to determine how much equities to hold. Like judging the outcome of a baseball game by the last at bat.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Lee_WSP »

William Million wrote: Sun Jun 13, 2021 10:55 am Can't imagine anything more foolish than using PE (or PE10) to determine how much equities to hold. Like judging the outcome of a baseball game by the last at bat.
I suggest you re-read Common Sense on Mutual funds chapter 2 by Jack Bogle.
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Re: The S&P 500 PE ratio is currently ~36. What would the PE be under old accounting rules?

Post by Beensabu »

Lee_WSP wrote: Sat Jun 12, 2021 5:46 pm
millennialinvestor wrote: Sat Jun 12, 2021 5:34 pm My guess is likely 45 plus. Biggest in US history. New accounting rules have caused the PEs to decrease. Just look at Berkshire Hathaway.
https://www.multpl.com/s-p-500-pe-ratio

Correct. 45
Oh wow. It's only been this high before during or after a crash. That's interesting.
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