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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: RealMuLan who wrote (84384)9/2/2008 7:39:11 PM
From: Sr K  Read Replies (3) of 116555
 
From that article, if "U.S. Stocks at 25.8 Times Profit Means Rally May End" and

"S&P 500 companies will report aggregate earnings of $21.69 a share in the current quarter, a gain of 3.9 percent from a year ago, and $24.62 a share in the final three months of 2008,"

then with SPX at 1277.58, its component earnings would be only 49.52 to have that 25.8 P/E.

With 21.69 and 24.62 or 46.31 in H2 2008, that only leaves 3.21 earnings for the other two quarters, whether Q1 and Q2 2008 looking backward, or H1 2009 looking ahead.

Therefore, the P/E of 25.8 includes writeoffs and writedowns and losses in the computation of the market P/E.

You can't count non-cash writeoffs and I don't think most large writedowns, nesp for goodwill, in computing a nP/E to use as a benchmark to assess over- or under-valuation.
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