Quote Originally Posted by Kaspar View Post
According to http://www.multpl.com/ the S&P500 PE is approx 19.31, which compared to the historic mean of 15.50 doesn't seem like 'meltdown' territory. It seems there is room for the bull market to go much, much higher.
Kaspar...be careful when dealing with PE Ratios...reported earnings can be distorted to create lower equity valued mirages ....To try and create a better gauge through PE normalisation, Shiller is the most famous producing his Annualised PE Ratio which is at a high 24.6 now...this is at the top of Crestmonts Research scale of fair value and is reaching the area where crazy things start to happen....very low inflation is the factor (driver) that is still making that 24 look fairly valued...any rise in inflation or Equity prices and Wall St becomes a red alert area.

Quote Crestmont Research in their 30th June report
"...P/E based upon reported earnings is near 18; it remains distorted below the normalized P/E of 23 due to currently high profit margins....."

High Profit margins is the other main worry John Hussman from Hussman Funds in his weekly newsletter outlines this problem...... quote ..."....that profit margins are about 70% above their historical norms, making raw P/E ratios (particularly those based on “forward operating earnings”) seem fairly reasonable. Understand that the use of raw forward operating P/E ratios implicitly assumes that these profit margins will remain at the most extreme levels in history forever...."


Not mentioned is the fact that the the S&P500 has been in a Secular Bear market Cycle (down trending normalised PE ratio period cycle) for 13 years now....with the current normalised PE Ratio figure of 24.6 (normally seen at the start of the Secular bear cycle) this would be considered as unusually very high