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Strategies & Market Trends : Value Investing

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To: E_K_S who wrote (56665)	1/16/2016 6:00:37 PM
From: Graham Osborn	of 78651

While I look at the Schiller PE as a loose measure one had to be uber careful using earnings as the operating metric. Earnings can be inflated through leverage and balance sheet tactics (a practice the tbook usually unveils) but those methods aren't sustainable. Because of reflexivity/ groupthink Fortune 500 CEOs tend to employ these tactics in synchrony (waah, his bonus is bigger than mine) producing systemic distortions of SPE. This is one reason there were lots of low/ reasonable PEs before the crash of 29. I recently read somewhere that MB said "one should view blue chip stated PEs with caution" or something to that effect, so I feel like I have some external corroboration. For some reason WSJ keeps saying the TTM SPE is 17 whereas I could have sworn I read an article saying it was 27.

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