This thread will highlight inconsistencies in the financial press ranging from benign to outlandish. The opening batsman is an article in WSJ Aug 15 comparing the S&P 500 P/E ratio with that in early 1994 based on last 12 months earnings. The current p to e ratio is 17.3 vs 18.3 going into 1994.
In the same section, in the daily Markets dashboard, this ratio is given as 18.47. Yes, based on last 12 months earnings.
So not only do we need to investigate whether p to e ratio presented r based on last 12 months or estimated next 12 months earnings, we can’t trust each of these earnings.
Unfortunately, MEME(S) has been taken private. Else we could have a field day. The possibilities would have been endless.
The above is not just restricted to one bad day at the office. Such errors have become all too common. The power point and instant gratification generation don't care. They just want data, loads of data- accuracy be dammed.
The other day, in the WSJ, there was an article about the high yield market. The high market has been on a tear for the last 5 years. The article stated, and i paraphrase - in spite of the 5 year bull high yield market, investors are feeling a little nervous.
Should it have read - because of the 5 yr bull ....... ?
Investors would be understandably nervous because of a huge run up. Not in spite of it.
As our readers know, from the low of 2009 of 675, the S&P 500 reached 2010 few days ago. 3 times 675 is 2025. So the market was up 2.9 times from 09 lows, or nearly 3 times.
But one of the common misstatements was :
The market has more than doubled from the 09 lows and has room to run .
As opposed to the market has nearly tripled in little over 5 years.
But does the smartphone generation (SG) care? You guessed it. It laps it up.
The other misstatement that's common - (when mkt was north of 2000)
The market is not over valued. It's p to e is 15 based on forward earnings, only slightly greater than long term average of 14.5.
Wrong on 2 counts. The ratio was 16.5, not 15. And long term average since 1900 circa 13.3 not 14.5. So mkt overvalued by 20 pct per this metric, not 3.5 pct.
Of course, when the interest rates eventually start rising - they already have [1], the market has to give back some of the interest rate related (over)valuation. Predictably, the media will not bat an eyelid and tell you they knew this all along. Cause the media always know what has happened. And why. And the SG? You got it.
[1] Southie et al., "Is this the end of the 30 - year bull market", Business forum section, June 19, 2012.
Gold is another example. Gold had reached 850 circa 1982 an all time high at the time - (inflation adjusted or otherwise). Probably it was popular with the pundints then (I can't verify this, but a safe assumption).
Fast forward to 2002. 20 years later gold was at 250. Now analysts hated gold. AFTER the fall.
In abt 2012 gold hit 1800. Everyone loved it. Good became must have to protect against geopolitical risks.
Now gold at 1210. Not so popular anymore. Though geopolitical risks still abound.
Some readers have inquired why the # of views has dropped lately. For example the Nuggets thread is app preaching 50000 views while this one appears to languish at 67.
We simply had a 50:1 split on the recent thread, so they become more affordable for individual investors.
In today’s wsj money and investing section pg C6 (article by Dan Strumpf) the p to e based on trailing 12 months was 17.9. In same section in the Market dashboard on p C5, the trailing p to e was 21.52. A 21 pct difference.