Posted on 03/02/2009 8:02:27 PM PST by TigerLikesRooster
How Low Can The Market Go?
Henry Blodget | Mar. 2, 2009
/snip
There were four massive stock bubbles in the 20th Century: 1901, 1929, 1966, and 2000. During each of these bubble peaks, the S&P 500 neared or exceeded 25X on professor Robert Shiller's cyclically adjusted P/E ratio.* After the first three of these peaks, the S&P 500 PE did not bottom until it hit 5X-8X. We're still in the middle of the last one.
The most recent bubble peak, 2000, was by far the most extreme we have ever experienced. In 2000, the S&P 500 by prof. Shiller's measure exceeded 40X (it had never before exceeded 30X). With the S&P 500 hitting 700 today, the PE has now fallen back to 12X. (See chart above.)
Three major bubbles are not enough historical precedent to confidently conclude where the S&P 500 will bottom this time around, but it seems reasonable to conclude that the trough will be in line with--or below--the preceeding lows
/snip
So where are we now?
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Using Professor Shiller's latest earnings data, here's where the numbers would fall out if the market just kept dropping and 10-year average earnings didn't grow from today's level:
P/E S&P 500 Level 10X 575 8X 460 (highest previous trough low) 7X 400 (average previous trough low) 6X 350 5X 300 (lowest previous trough low)
In short, if the S&P fell straight to the high-end of its previous trough range (8X PE, or 460), it would fall another 35% from today's level (700)
If the S&P fell straight to the low-end of its previous trough range (5X PE, or 300), it would fall another 55+% from today's level.
Here's hoping we don't set a new low on the downside.
(Excerpt) Read more at businessinsider.com ...
Ping!
..how fast can the morons in Congress run?
I still think it will get to 5000 before june.
P/E S&P 500 Level 10X 575 8X 460 (highest previous trough low) 7X 400 (average previous trough low) 6X 350 5X 300 (lowest previous trough low)
Would SOMEONE please tell the Honorable U.S. Congress that there stimulus package did NOT work! PLEzzz... Don’t try anymore stimulus to a corpse, some companies need to die, and out of the mess, new better, cleaner more efficient companies will rise. It is historically something that always seems to happen, LESS Gov’t will HELP business.
With Obama badmouthing capitalism all the time there is no bottom.
How about end of April.
That’s what I think. The fool at the helm has set a course to crash the ship called Prosperity.
6660. or maybe just 666.
(Sort of kidding)
"Alex, what is, "Two feet lower than whale shit?"
*DING*DING*DING*DING*
I was thinking a year ago I would move back into the market at 7 but now I think you may be right.
And the day the activist Clinton government's lawsuit went against Microsoft, signaled the downturn. Janet Reno sent the market spiraling.
Good post, thanks. I just sleep so well being in all cash since Dec. 2006. I’m just grateful to have had the foresight and good fortune to have missed this train wreck. Many people are just getting killed.
Hey Stupid I mean “OBAMA”
Drop the capital gains to 0%!
Get rid of Mark to market!
Lower the Corp Tax rate to 11%!
Don’t tax interest on savings!
June? You think it will take that long?
LOL! I was going to say, "how stupid can fedgov get?"
Regrettably, the answer to both questions leads to the conclusion that the market can go to "zero".
So the GOP controlled the Congress during the two big bubbles that led to this mess? Is that your point?
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