Dow 7000: What’s the P:E?

Does anyone know what the combined earnings of the DJIA 30 is? I still have a couple decades before retirement; if the P:E ratio is getting back to normal, I might start buying because (a) it’ll either come back or (b) it won’t, in which case “investment strategies” aren’t going to help one way or the other.

7 thoughts on “Dow 7000: What’s the P:E?

  1. DONT
    Unless you really want to be in world of hurt. First of all the current down-leg is not done. Secondly we will get a bit of a rally in the second part of the year but that will be replaced by another potentially even deeper decline. As to your idea about PE … here is a great post a smart guy on that subject. So unless you are a trader, keep your money in cash or if you like buy some gold when it retreats from the current levels.
    http://www.marketwatch.com/news/story/how-current-pe-ratios-stand/story.aspx?guid={13BD1A19-0A04-4FEE-97A6-0A1C410D6881}&dist=morenews

  2. Thomas:

    I didn’t read your article, and I didn’t need to. Your advice is EXACTLY backward. You say “xxx will happen at time t” — since you are not a time traveler, these cannot be more than informed predictions, regardless of the values of xxx and t. They might also be uninformed predictions… reading the articles you link to might tell me which.

    On the basis of some predictions (informed or uninformed… it doesn’t really matter) you recommend an extreme trading choice: keeping all money in cash or gold. If you recommended a moderate strategy like “Invest small amounts regularly (dollar cost averaging) at reasonable quantities.” that might be sensible advice. If you suggested looking at some basic metrics (like P:E ratios) that might be sensible advice. But advising an extreme position (regardless of whether it’s “throw it all into stock X” or “keep it all in cash”) based on very specific predictions of what will happen… now THAT is dangerous.

  3. Michael Chermside:

    How is it “extreme” to avoid the business stocks when witnessing current volatility and earning declines? If you “know” the stock market is, at best, unstable, should you not avoid it for a short time. Sure you may miss the beginning of the lauded rally, but at least you will not loose to another bear drop. Dollar cost averaging simply dilutes your losses in a bad investment.

    I agree with Thomas, stay out of corporate stocks unless:
    1) Stability returns or
    2) P/E ratios are not through the roof or
    3) You have researched a specific company thoroughly

  4. @Kyle: At the very least, it’s “extreme” in the sense that it’s 0% of investment dollars allocated to a stocks.

  5. @Michael – suit yourself. Feel free to check the % drops between your post and today. I am sure we have sunk some more. And these drops will continue for some time. But dont believe me. Its your money.

    @Larry – hope your standing aside and keeping your funds in cash. Things will pick up a little this fall but if you have a long term investment horizon then I would actually wait at least a year or more. After a rally that may take us back to 1050 on the S&P we will see another evens steeper drop than what we have now ( as I am writing this we touched 670 on the S&P). There has NEVER been a crisis like this before. You will know its ok to put money in stocks when nobody advises you to do so. When everyone is running screaming the other way at the mere mention of the word “stock” then you’ll know its ok to buy.

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