Sharemarket falls in good economic times ..a laymans paradox!!!!!!
Quote:
Originally Posted by
belgarion
Just so long as the 200 MA is defended then I still consider this correction to a based on short-term macro events (read: ongoing noise and rubbish from greece et al (and there's a huge amount of rubbish! another Lehman's? don't make me laugh!), Japan earthquakes, Middle east debacles affecting perceptions of oil supply, spikes in commodity prices driven by fear of currencies and perceptions of short term shortages, Australia floods, etc. etc. ... meanwhile the rest of the world is just getting "battle-hardened" and getting on with business.)
Totally agree Belg
The media have been incredibly negative these last 2 years
Based on what you have read in the media do you think the S&P 500 earnings/index is anywhere near what it was in the euphoria years before the 2008/09 GFC...
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Answer....S&P500 earnings forecasted to be at an all time high in 2011
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S&P 500
Earnings in prior years: ............. Earnings ............. Historical P/E .... Historical Earnings Yield
2010 Actual GAAP Earnings............ $76.97........................ 16.3.......................... 6.1%
2009 Actual GAAP Earnings........... $50.97........................ 21.9.....................4.6%
2008 Actual GAAP Earnings........... $14.88.................. 60.7.....................1.6%
2007 Actual GAAP Earnings........... $66.18.................. 22.2.......................... 4.5%
2006 Actual GAAP Earnings........... $81.51....................... 17.4.................... 5.7%
2005 Actual GAAP Earnings........... $69.93....................... 17.8.................... 5.6%
2004 Actual GAAP Earnings........... $58.55....................... 20.7.......................... 4.8%
2003 Actual GAAP Earnings........... $48.74.................. 22.8......................... 4.4%
EST 2011 GAAP Earnings................ $92.80.................. 14.2......................... 7.0%
The feeling is from the boffins is that the est $92,80 profit / index is set too high ..not because the economy is ailing but totally the reverse. When the USA population "get over it" and perceive the economy is coming right monetary constraints will emerge to control the anticipated inflation and excessive growth ..therefore interest rates will rise, currency will rise, commodity prices will not necessarily come down, competitive pricing strategies will increase thereby squeezing profit margins and earnings.
In other words when the economy finally comes right as everyone is wishing and hoping for....the Equity Market (share market S&P500) could soften and drop into another cyclic bear cycle. This drop could be large, annualised P/E Ratio trends down in a Secular Bear Market (2000-20??). Inflation (not the economy) is the major driver of the Equity market therefore if inflation increases, the market drop is magnified ..all happening at the time when the economy has "come right" :
Contrary to the media...the best times for businesses in the S&P500 index is probably happening NOW.
Data References
http://www.investorsfriend.com/S%20a...0valuation.htm
http://www-eq.standardandpoors.com/p...0,0,0,1,0.html