Despite Plunge, Stocks Are Still Expensive

New York Times:

The main problem for the stock market is obviously the economy. But it’s not the only problem. Stocks are also under pressure because they are fairly expensive right now relative to earnings.

Read the whole story: New York Times

Comments

[grizzly bear55]

11:37 AM on 08/07/2011

Manipulation before the run up.

I have been trading over 30 years and the pattern is clear, set the panic among the general public, shake the loose leaves and then set the media to blow their rally horns again.

[Craig2]

04:49 PM on 08/06/2011

Good afternoon, So, if stocks prices are inflated how can it be a crash when there is an adjustment? Sounds like a manipulated market to me.

[homer2000]

03:10 PM on 08/06/2011

We'll wait.

[coolrayfruge]

12:18 PM on 08/06/2011

Duh!.. stocks are plunging becase they are expensive!
Let them choke on their greed.

[Robert Turner]

12:04 AM on 08/06/2011

David Leonhardt is categorically and financially incorrect. P/E ratios are backwards looking. Forward P/Es for most companies in the S&P 500 are moderate to low, especially now. He needs to qualify what he means by "expensive" and demonstrate what stocks are expensive. Is NFLX expensive versus forward EPS? Yes. Very. Insanely. Is GE expensive versus forward EPS. Hell no. Not even close. AAPL? Apple, folks. Apple has blown past consensus EPS two straight quarters by wide margins. Most companies, if they beat, beat by pennies. AAPL beats by dollars. Forward P/E for AAPL is in the 14 range. Cheap, cheap, cheap. David, duh, but you're wrong.

[ciabrat]

01:31 PM on 08/06/2011

Doesn't Leonhardt acknowledge in the article that judging prices by historical standards isn't a popular approach even though it was recommended by Warren Buffett's mentor, Benjamin Graham? I'm a novice investor, and I'm not sure why a ratio based on known historical data would be a less reliable predictor than a ratio based on fairly speculative guesses at future performance. Even one's choice of a particular period of years could affect the ratio if there was a bubble or crash in that period. By the way, the historical comparison is even worse if the hundred year ratio is used (about 16 according to Leonhardt - see his article of Oct. 28, 2008). As an aside, I wonder if the current ratios are worse partly because so many companies are sitting on so much cash instead of using it to grow, expand productive assets, r&d, etc.

[mmm611]

07:10 PM on 08/05/2011

The price of a stock depends on what people think the company will do in the future. It's nice to know what the P/E ratio is based upon the last years earnings because that is up to date. Buying a stock based upon the last ten years would be like marrying an old super model. Nice to brag about, but what will he/she look like in a year?

[castlemike]

05:14 PM on 08/05/2011

DJIA Monday Open 12,289.69

DJIA Friday Close 11,444.61 [Closed Green +60.93 for the weekend close but Down -845.08 for the week]

[BobSF94117]

04:13 PM on 08/05/2011

Speaking of PLUNGES, the HuffPo Business page currently lists the NASDAQ at a jaw-dropping -25,561,374.90, a 99.99% collapse.

NASDAQ 2523.10 -25561374.90 -99.99%

hehe

[JoeBlough]

02:54 PM on 08/05/2011

The stock market, much like housing, is for the high rollers. The little guy gets his clock cleaned whenever he enters.

[RS]

11:52 AM on 08/06/2011

Because investing in the stock market ALWAYS boils down to this fundamental question:

HOW MUCH CAN YOU AFFORD TO LOSE?

'Nuff said.

[vinyl1]

01:56 PM on 08/05/2011

It depends on which stocks you are talking about. There are always out-of-favor sectors and stocks that are favorably priced. You just have to look at what nobody wants, and find the values.

[Cratewasher]

11:54 AM on 08/05/2011

By expensive, they must mean overpriced.
Not surprisingly, they have plenty of room left to fall.