Equity Markets are a Farce!

<h1>Equity Markets are a Farce!</h1>Author: <a title="My Wealth.com" href="http://www.articlesbase.com/authors/my-wealth.com/119457.htm">My Wealth.com</a>       <ol> <li>Well here something else to chew on:</li> </ol>     The S&P 500 P/E Ratio has more than DOUBLED from the end of 2008, which at 60.7 was a historic figure at the time!   Why is this happening and what’s the outlook going forward?    The current P/E Ratio for the S&P 500 Index is at a whopping 143.95, per their website. That’s more than 3 times its historical average!!! Is no one shocked by this figure???    To put this figure in perspective, the S&P 500 P/E ratio throughout and after the Internet Bubble of the late 1990s/early 2000 was in the high 20s and low 30s. And we all know how that turned out!    So what needs to happen? Either corporate earnings need to go up, or stock prices need to come down.  The only way I can foresee earnings catching up with current prices is if companies are able to slash costs such to the point that a guy like “Chainsaw Al Dunlap” would be receiving humanitarian awards from labor unions!    What seems more likely however is that prices need to come down to become more in line with historical averages. As it stands now, there is NO value in this market and I would caution anyone looking to invest today to be extremely careful.   Does this mean that it’s time to get short? Not necessarily. The old adage that “the market can stay irrational longer than you can stay solvent” applies now more than ever. While the P/E ratio is not the only metric one can use to measure value, I’m surprised that no one even mentions it.   Which brings me back to my original point, that the only thing driving this market is a false belief that government spending is going to somehow support these levels. Perhaps the government IS supporting these levels through the mythical “plunge protection team” (PPT).  Right now there is a lot of institutional money pouring back into the market as the mortgage-backed debt markets have pretty much blown up and that game is over.   Once cooler heads prevail and the “smart money” sees this market for what it is, the decline could be precipitous. Until that time I will proceed cautiously, and I’d advise you to do the same.     About the Author: myWealth.com provides affordable, online personal finance courses that enable everyone to effectively manage their money by making sound financial decisions. Making sound decisions is a prerequisite to achieving your financial goals and becoming financially secure. myWealth.com offers numerous courses that cover investing, managing ones personal finances and currency trading.

myWealth.com's team of instructors, led by Sean Hyman and Bob O'Brien, pride themselves in thoroughly answering questions and patiently guiding each and every student through the course. Our instructors have years of experience trading various financial markets. They also have years of experience providing financial planning advice to individuals like you.Article Source: <a href="http://www.articlesbase.com/">ArticlesBase.com</a> - <a href="http://www.articlesbase.com/investing-articles/equity-markets-are-a-farce-1127775.html" title="Equity Markets are a Farce!">Equity Markets are a Farce!</a>

Well here something else to chew on:

The S&P 500 P/E Ratio has more than DOUBLED from the end of 2008, which at 60.7 was a historic figure at the time!

Why is this happening and what’s the outlook going forward?

The current P/E Ratio for the S&P 500 Index is at a whopping 143.95, per their website. That’s more than 3 times its historical average!!! Is no one shocked by this figure???

To put this figure in perspective, the S&P 500 P/E ratio throughout and after the Internet Bubble of the late 1990s/early 2000 was in the high 20s and low 30s. And we all know how that turned out!

So what needs to happen? Either corporate earnings need to go up, or stock prices need to come down.

The only way I can foresee earnings catching up with current prices is if companies are able to slash costs such to the point that a guy like “Chainsaw Al Dunlap” would be receiving humanitarian awards from labor unions!

What seems more likely however is that prices need to come down to become more in line with historical averages. As it stands now, there is NO value in this market and I would caution anyone looking to invest today to be extremely careful.

Does this mean that it’s time to get short? Not necessarily. The old adage that “the market can stay irrational longer than you can stay solvent” applies now more than ever. While the P/E ratio is not the only metric one can use to measure value, I’m surprised that no one even mentions it.

Which brings me back to my original point, that the only thing driving this market is a false belief that government spending is going to somehow support these levels. Perhaps the government IS supporting these levels through the mythical “plunge protection team” (PPT). Right now there is a lot of institutional money pouring back into the market as the mortgage-backed debt markets have pretty much blown up and that game is over.

Once cooler heads prevail and the “smart money” sees this market for what it is, the decline could be precipitous. Until that time I will proceed cautiously, and I’d advise you to do the same.

myWealth.com provides affordable, online personal finance courses that enable everyone to effectively manage their money by making sound financial decisions. Making sound decisions is a prerequisite to achieving your financial goals and becoming financially secure. myWealth.com offers numerous courses that cover investing, managing ones personal finances and currency trading. myWealth.com's team of instructors, led by Sean Hyman and Bob O'Brien, pride themselves in thoroughly answering questions and patiently guiding each and every student through the course. Our instructors have years of experience trading various financial markets. They also have years of experience providing financial planning advice to individuals like you.

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Article Tags: market, stocks, government, bailout, intervention, fed, policy, equity, recession

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