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[mad_doctor]

I was also thinking that Shiller's earnings numbers may be estimated.  IMO, technically, earnings reports before the end of the quarter should be treated as estimates until they are on file with the SEC.  The P/E of 139 reported in that article I cited was probably based on real earnings reported for quarter.  You are probably right also that a small handful of really bad companies are skewing the P/E for the whole index, but still...

[prytania3]

I was also thinking that Shiller's earnings numbers may be estimated.  IMO, technically, earnings reports before the end of the quarter should be treated as estimates until they are on file with the SEC.  The P/E of 139 reported in that article I cited was probably based on real earnings reported for quarter.  You are probably right also that a small handful of really bad companies are skewing the P/E for the whole index, but still...

Forward P/Es are estimations by definition; whereas, trailing P/Es use price to earnings over the past 12 months. Obviously the trailing P/Es are more accurate, but Wall Street in its ever forward-looking position looks at the forward P/Es more than the trailing.

So I could see the average trailng P/E for the S&P as high as 130, but the forward looking more around 20. Of course, if estimations are off...well then....

ANF has a trailing of 164 and a forward of 20. Personally, I think *that's* pie in the sky. I can]t imagine a retail store like Abercrombie and Fitch is going to increase that revenue line that much over the coming months. I just don't think the consumer has it.

BAC, otoh, had a trailing of like 180 and a forward of 20. I find that more likely because I think Merrill will start making money for them. Then again if there is another rash of bad mortgages, that could be pie in the sky too.

[mad_doctor]

So, prytania, what is Prechter saying these days?  As I recall, he was predicting a break one way or the other at the beginning of November?  The market has been sideways all fall and winter thus far.  I wonder what his take will be?

I'm still expecting a downward correction, although I can't say when it will happen.  Stocks are still way overvalued, and I don't believe that in this case earnings are a very good indicator of true productivity.  There's a good chance that when the assets bubble pops, its suddenness will take a lot of people by surpise.

[prytania3]

Honestly, I haven't been paying attention since I decided to take the CFA exam, but word is that it's toppy. I still think it's going to 1100, though.

[parispundit]

For what it's worth (0), I need to move some money from stocks to cash for eventual college tuition purposes, and I am planning on doing so around April 1 - I think the market is on the toppy side, give or take 50 points on the S&P, and the old adage sell in May and go away comes into play.

That said, I still expect, on contrarian grounds, for the US recovery to be stronger than is now expected.

[clean]

For what it's worth (0), I need to move some money from stocks to cash for eventual college tuition purposes, and I am planning on doing so around April 1 - I think the market is on the toppy side, give or take 50 points on the S&P, and the old adage sell in May and go away comes into play.

My first economics prof (at a community college, even) taught me, "You never lose money when you sell for a profit".  Ive also heard that "pigs get slaughtered".

IF you need it, and need it soon, why not lock in what you have.  Is it worth the risk to get  a little more, or a lot less?

Just a thought.

[mdwlark]

Hi pry and clean, and others,

Is there going to be a temporary correction in an overall upward trend, or is there likely to be a major downturn soon that will last for a while after this tops out?  What time frame are you predicting?  I'm in a precarious position and don't have a lot of recovery time.  I have a Roth IRA and a 401K (501?) or whatever the numbers are. (I won't absolutely hold you to your prediction.)

[clean]

He who lives by the crystal ball, eats glass.

IF I knew, even 51% of the time, I wouldnt have to do anything else!

[womanofproperty]

Is there going to be a temporary correction in an overall upward trend, or is there likely to be a major downturn soon that will last for a while after this tops out?  What time frame are you predicting?  I'm in a precarious position and don't have a lot of recovery time.  I have a Roth IRA and a 401K (501?) or whatever the numbers are. (I won't absolutely hold you to your prediction.)

When it comes to predicting the future, I'm pretty traditional myself - i.e. the I Ching & Tarot cards.  Never could get the hang of tea leaves; and reading the entrails of birds is too messy.

Sorry - I know you're concerned, but if it's peace of mind that you're looking for, then I think it might be better to identify what your time frame is for retirement (and beyond).  You say you don't have a lot of recovery time - which I assume means time to retirement - so it seems to me that you might want to make sure you have the appropriate allocation of investments.  You'll want to have stocks in your portfolio, but you won't want to have everything in stocks (or mutual funds investing in stocks). 

I suspect I'm older than you are.  I do plan on retiring, but I don't plan to stop working and although I may teach a course or two, I won't be working in academia.  Something fairly lucrative and part-time.  I already have bond funds as well as stocks, and I'll be gradually shifting more assets into bond funds in my Roth IRA in the next several years. 

All bets are off, though, if Martians land on the White House lawn.

[prytania3]

Meadow, I just haven't been keeping track lately at all.

There is a section on technical analysis on the CFA exam.

Ha to you non-believers!

[mad_doctor]

I think a short-term upward tick is possible, perhaps even to 11,000 as you say, prytania.  However, I see huge fundamental issues that aren't being addressed.  The last time we had an economy like this, the Great Depression, it took about 25 years for the market to recover to its pre-depression value.  Part of the issue, as I see it, is that government spending probably contributed greatly to the duration of the Great Depression, and that's exactly what our government is doing this time around also.  FTR, I do believe government spending can help an economy, but it can help an economy like going shopping can help people with mild depression, or a sugar high can help someone with mild fatigue, but neither shopping nor sugar highs will help a cancer patient.  Even Keynes himself would probably argue that we can't spend our way out of a depression.  Once the sugar high is over, the TARP and stimulus packages are spent, the patient will once again start showing the symptoms of a cancer patient.

[parispundit]

People who compare our current economic situation to the great depression are wrong. It is true both included financial panics and stock market crashes. But the differences are even more important. We have had nothing like the mass unemployment of 1930, we have, thank FDR, a social safety net, including things like social security pensions and unemployment insurance, and we do not have a superstitious fear of budget deficits, at least not to the degree that had even FDR running on a balance the budget platform in '32. We also have, internationally, a much better situation. Instead of an agricultural depression, we are looking at a long-term agricultural boom as China and India import ever more food from the US. While Doha is in trouble, we are not looking at competitive devaluations and massive new import tariffs a la Smoot-Hawley. Yes, China's currency is over-valued, but I am optimistic that will change in the near future.

Anyway, things are all right here in Fortress Europe - see today's column by Mad Doctor's favorite, Mr. Krugman.

[mad_doctor]

Fortress Europe?!  Now I'll have to go check up on what Mr. Krugman's saying these days, parispundit...

[prytania3]

Mad Doctor, I know you aren't wild about the current administration, but sometimes you have to give the devil his due. The govt. is making money on the TARP. Of course, I haven't seen the balance sheet, but there is money flowing in from the lendees at this point.

[mad_doctor]

OK, parispundit.  I've had a cup of coffee and I've read Mr. Krugman's column.  God help me, he actually sounds rational today - maybe it's time to up my medication?  I'd like you to clarify some things for me, if you have a minute or two...  Back when the EU was being formed, and the Euro was being negotiated, I remember having many discussions with my students on the various issues.  Back then, it was my distinct impression that the EU was organizing itself in much the same way as a cartel.  Although cartels may have their place from time, they work best when they're organized around a single, simple commodity.  Europe clearly was not that, so I was holding my ground that in the long-term the EU was going to have the same kind of management and control problems that cartels experience.  I haven't really revisited the issue since then.  Now, you live in Europe, so my questions are these: 1)  how close was my initial assessment, and 2) do you think Krugman and I actually agree on something?

Prytania...  I'm open on this issue, so give me some honest details and maybe I'll see your point.  I haven't seen the balance sheet either, but my point was precisely that the bill itself is just a big spending bill that may provide a few short-term benefits, but doesn't address the core economic cancer behind the current depression ($12T debt, 10% unemployment, devaluing currency, incipient inflation).