Forum Archive Index - October 2001

["Peter" <pmaiden@xtra.co.nz>]

The average P/E on the S&P 5000 is around 25 to 26 at the moment. This compares to the historic average of 11 to 12.

 

Therefore those who believe that things always revert to the mean would say that the S&P will fall over the next few years or so.

 

The other side of the P/E ratio is earnings and that looks pretty ugly as well for the S&P. Consensus forecasts for 2002 seem to be declining as the months go by - even though, what else would we expect, 2002 earnings are expected to be higher than 2001.

 

Sharemarkets run on future expectations and hope. So with a great level of hope still existing in the US we will probably see little change in the way that the market values stocks.

The New Zealand situation isn't much better. This years earnings of the NZSE40 companies are down on previous years and there was something in the papers the other day reporting an analyst saying that next years earnings growth would be between 0-5%. Put this in context of the NZSE average P/E being about 18 means we are living in hope of improved times as well.

The Nasdaq situation is even more sublime.

I read in the The Wall Street Journal the other day that if you took all of the profits of all Nasdaq companies over the last five years, and subtracted the losses, the result is a negative number. Therefore since 1995 the companies currently listed on the Nasdaq haven't made a collective dollar  - in a period that has been heralded as the greatest period of innovation and productivity in history.

If the foundations of capitalism is profits and if the motive of some man in Afghanistan is to bring down capitalism than he couldn't have chosen a better time to do what he has done - and put the foundations of capitalism under even more pressure.

No more on that subject - this is a sharechat forum

Cheers

Peter