But then again PE ratios are pretty useless at ‘projecting’ future growth
I think we established already that nobody can predict future stock prices (Ben Graham). Your scatter graph just shows that Ben was right all the time ... as, i am sure, we knew before ;
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"Prediction is very difficult, especially about the future" (Niels Bohr)
It is. Actually I think this is the chart I was looking for when I wrote my initial response, but I couldn't find it. Where did you find it? Is it from one of the ANZ briefing papers?
Actually - not sure, whether interesting is the right word to describe it. "Frightening" might be a more appropriate term.
Now the question is - do earnings follow the share price or does the share price still follow the earnings ?
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"Prediction is very difficult, especially about the future" (Niels Bohr)
It is. Actually I think this is the chart I was looking for when I wrote my initial response, but I couldn't find it. Where did you find it? Is it from one of the ANZ briefing papers?
Actually - not sure, whether interesting is the right word to describe it. "Frightening" might be a more appropriate term.
Now the question is - do earnings follow the share price or does the share price still follow the earnings ?
Factset.com Insights ....have some good stuff
Free to see their regular updates
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
I think EFTs have their place to play in the ever increasing stretch in the average PE. A prudent investor determines whether a share price is becoming expensive but an ETF is buying shares at whatever the price. Without intending to sound too much like Chris Lee the higher an individual share price compared to the competition the more an ETF buys of that share.
I think EFTs have their place to play in the ever increasing stretch in the average PE. A prudent investor determines whether a share price is becoming expensive but an ETF is buying shares at whatever the price. Without intending to sound too much like Chris Lee the higher an individual share price compared to the competition the more an ETF buys of that share.
I used to think that too, but then I did the "what if the money that was destined for a passive ETF went into the market direct". The amount of $ into the market is still the same so relatively the average PE stays the same. There would still be no difference in the PE stretch would there? (most would argue that active fund managers also buy whatever the price and they pretty much stick pretty close to the index)
And if there is supposed "stretch" then one day this will revert to the mean and you will have been able to make alpha returns by buying dog stocks in indexes. Not sure if passive ETF's have been around long to do a good proper analysis of that though.
I myself have started an experiment and have 2 funds. One I purchase the NZ top 50 by capitalisation (mirroring the FNZ) and another I purchase equal chunks of the top 50 stocks. So far the equal chunks fund is ahead but its very early days. I reweight each one half yearly on the 30th June and 31st Dec.
So why is Wall St ignoring all that bad news out there, and keep rallying higher?
“Investors are looking beyond the current environment and they’re looking at the fact that policymakers have put forward a firm commitment to do what it takes ... and they’re expecting recovery,” Arone said, even as current market psychology looks like “a head-scratcher” to some.
“There are a number of risks on the horizon but ... if you believe that on the other side of the pandemic, we’ll return to some element of economic growth with very low rates, benign inflation and ... incredible support in both fiscal and monetary policy, that has historically been a very strong backdrop” for markets, he added.
Originally Posted by BlackPeter
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