tag:blogger.com,1999:blog-8358039.post4229715586763167481..comments2024-03-25T15:17:04.488-07:00Comments on Captain Capitalism: P/E Ratios - What They Tells Us of Probable ReturnsCaptain Capitalismhttp://www.blogger.com/profile/05620212946121617985noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-8358039.post-73623882959700326502011-06-15T21:52:47.277-07:002011-06-15T21:52:47.277-07:00...You included all the companies that had low P/E......You included all the companies that had low P/E ratios because they were on the verge of bankruptcy, right? And the fact that treasuries had comparable long-term yields pre-2000, and the fact that investors are willing to take lower returns on investments in mature economies, implying a higher evaluation.<br /><br />Yeah, that's what I thought.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8358039.post-79597365305528798372011-06-08T12:53:53.338-07:002011-06-08T12:53:53.338-07:00The higher the P/E, the lower the return. So don&...The higher the P/E, the lower the return. So don't chase stocks with high P/E ratios.Jaime Robertonoreply@blogger.comtag:blogger.com,1999:blog-8358039.post-1855414601596986432011-06-08T09:38:55.355-07:002011-06-08T09:38:55.355-07:00Whoa--it's like "profitability" is a...Whoa--it's like "profitability" is a key factor in determining whether a company will grow to merit a higher stock valuation. And it's also like the 7-10% annual returns after inflation that we're always being promised by the financial guys are a chimera.<br /><br />Whoa, man, that's some good stuff...Bike Bubbahttps://www.blogger.com/profile/08193546045614393425noreply@blogger.comtag:blogger.com,1999:blog-8358039.post-29952932130266946122011-06-07T18:59:32.963-07:002011-06-07T18:59:32.963-07:00Not an economist or statician, nor even inspired t...Not an economist or statician, nor even inspired to become either, but it looks to me that there is a inverse correlation between P/E and earnings - e.g. the lower the PE the higher the returns, and vice versa. So average PE over a 10 year period is a reasonable predictor of the return of the market. <br /><br />The second observation is that it doesn't matter which of the date ranges selected - there's a correlation in all the shown periods.<br /><br />The third observation is that the current situation is no different than any of the other periods of time.<br /><br />Last, it appears the averaging involved in the chart tends to dampen any short term blips of irrational exuberance and insanity of the market.Anonymousnoreply@blogger.com