Cervix Is Really High 2 Days Before Period

Is the stock cheap? I'm not going to undersell

commented in the trap of PER and dividend PER how low they were then were not shopping occasion. When the cycle changes, the low PER usually no more than vestiges of past profits, as often the prices begin to reflect the deterioration in expectations before PER begin to reflect the drop in profits. However, inexperienced investors are usually duped by these tempting rates and are holding right at the worst possible time of the cycle. There are few investors have been buying shares of banks at the same rate as their prices were falling, blinded for a few ratios that were just memories of a past that will not return. On the stock is trading what are the expectations, not the present.

When the economic cycle will be approaching the bottom, starting to happen just the opposite: despite falling stock prices, profits down as much (or turn into losses) the PER rise. It seems obvious that a company is in losses is zero (at least not necessarily), which say that economic cycles distort the validity of the PER as a method to identify whether a stock is cheap or expensive.

To some extent mitigate this effect we use the P/E10, using the average of the benefits of the previous 10 years.






see in the chart above how this 10-year average PER of the S & P500, popularized by Yale professor Robert Shiller was at 15.4 in late 2008. It is considered a good opportunity to purchase bear market when low of 10, which was still far then.

Today, after recent drops in the stock market, would be at 13 times. Let's take

earnings estimates Standard & Poor's in 2009 and 2010. Calculate what level of contribution of the S & P500 P/E10 would correspond to a 10. We take an estimated profit of $ 32.41 for 2009 and $ 39.59 for 2010.

With these data we obtain the level of 562 points S & P500 for a 10-year average PER of 10 in late 2009, implying a 25% further decline from current levels. End of 2010, the level would be 544 points S & P500. That would be the level that drilled down would indicate a good buying opportunity as average profits over the past ten years. Of course, this is an indicator, and not the philosopher's stone. We could not get to see the 10 and miss the opportunity to purchase but if we go above has to be clear that the valuation of the stock market is not as cheap as it may seem at first glance. As additional consideration should be borne in mind that although the average PER of ten years is a prudent set of valuation, we must not forget that just the previous ten years have been characterized by corporate profits based on a very high water consumption was produced through a result of a senseless debt credit bubble. We have become accustomed to living spending well above real income, and this has been completed. The housing bubble produced a wealth effect that encouraged the over-consumption, and that in the case came to consume American revaluation of housing through new borrowing. After


P/E10 see that level of less than 10, it should be confirmed through other important indicators such as the ECRI , unemployment, durables orders , Crossover ITRAXX and HMI .