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Strategies & Market Trends : Sharck Soup -- Ignore unavailable to you. Want to Upgrade?

To: ChrisJP who wrote (31516)	7/20/2001 10:36:02 AM
From: besttrader	Read Replies (2) \| Respond to of 37746

Is 18 a good number in a recession?

To: ChrisJP who wrote (31516)	7/23/2001 12:48:40 PM
From: Dave	Read Replies (2) \| Respond to of 37746

Current trailing PE for the SP500 is 24. 18 is a good number -- 25% lower. 12-15 is a good historical average. A P/E of 18 is still 20-100% higher than average. The current value of 24 is 60-150% high. And bubbles NEVER just deflate to their average values. Like the others, this one WILL drop irrationally low. So don't be surprised if the S&P 500 P/E hits the 5 to 8 range. From 24, that would be a drop of about 65-80% 75% of 1200 is ...... 900. Don't forget that during a recession, the both P/E and EPS decrease. So the while the S&P P/E might only decrease, say, 65-80%, if earnings decline by 50% in the same time, then the S&P 500 would decline from 1200 to 200-120. Just putting that down here in figures seems outlandish, but bigger drops have happened, and the bull run we've just experienced has been historically unprecedented. It is not unreasonable to expect an unprecedented fall from such a peak. It's just frightening. Dave