Ftse p/e Ratio

StevieJ

If the p/e ratio of the Ftse100 was the same today as it was a year ago, the Ftse would be registering over 8600 instead of the 5300 we have today.:eek: we were obviously a lot more optimistic last year.

purch

I know the feeling

michaels

Do you buy a share based on what you think it was worth last week or on what you think it will be worth next week?

Loughton_Monkey

StevieJ wrote: »

If the p/e ratio of the Ftse100 was the same today as it was a year ago, the Ftse would be registering over 8600 instead of the 5300 we have today.:eek: we were obviously a lot more optimistic last year.

That's roughly the same concept as noting that 'Company X' was apparently valued at £36.3 billion today, but £38.1 billion yesterday. What changed in the last 24 hours?

Instinct alone tells us that Company X cannot possibly be worth any different - barring specific news about that company.

Many long term investors [e.g. buffet] make money this way. Solid company, dividend of £X can be largely relied upon, price £Y looks cheap, so buy.

Rather obviously, today's high-tech transparency and instant trading have changed the markets from 90% 'fundamental' and 10% 'emotional' round the other way. I personally believe today's markets are 90% 'emotional'.

StevieJ

michaels wrote: »

Do you buy a share based on what you think it was worth last week or on what you think it will be worth next week?

I was just trying to point out that the markets are 'cheap' based on fundamentals, of course it doesn't mean that the fundamentals can't deteriorate with a major calamity.

lvader

Last years FTSE P/E was a bit skewed by BP posting a loss, but yes stocks are very cheap at the moment.

DervProf

lvader wrote: »

Last years FTSE P/E was a bit skewed by BP posting a loss, but yes stocks are very cheap at the moment.

I bought 12 Chicken OXO last week, and I thought they were quite pricey.

Mr_Mumble

10 Year Gilts are yielding 2.34%
FTSE-100 current year forecast yield is 3.9%

Kinda crazy but it does show how low expectations have gotten for the economy, pricing in a mild recession for Europe & the US methinks.

The sector (other than banking) that seems to be pricing in major problems is big oil: BP on a P/E of 5.4 while Shell is on a P/E of 7.7 for the current year. In the event of a flat, stagnant, muddling through economy equities look very cheap compared to government bonds or housing or, well, anything.

Thrugelmir

StevieJ wrote: »

I was just trying to point out that the markets are 'cheap' based on fundamentals, of course it doesn't mean that the fundamentals can't deteriorate with a major calamity.

Maybe something to do with RBS and Lloyds having lost 40% of their market value in recent weeks.

For good reason I believe.

Some of the investors on the savings board must have taken a pasting with their punts based on the banks looking cheap a few months back!

bendix

If you have a medium to long-term perspective, there is no denying that now is an excellent buying opportunity for shares around the world. I'm certainly on a buying spree and could care less about the likely turbulence of the next six months or so.

If I was buying a sofa, I'd wait for the sales. That's precisely how I view this period re buying shares.

Thrugelmir

bendix wrote: »

If you have a medium to long-term perspective, there is no denying that now is an excellent buying opportunity for shares around the world. I'm certainly on a buying spree and could care less about the likely turbulence of the next six months or so.

Without question though the effect of credit contraction and reduced Governmental spend globally. Will mean a re-rating for many shares. The question is when's the right level to buy back in again.