Sunday, May 28, 2017

May 28, 2017, Bob Brinker's Moneytalk: NOT live today:

May 28, 2017....Bob Brinker in NOT live today......(comments welcome)

HAPPY MEMORIAL DAY AND SINCERE THANKS TO ALL SERVICE MEMBERS.

Radio Stations:
710KNUS Denver
WNTK  
KION 1460  Monterey

55 comments:

KC said...

So Bob talked about stocks being overvalued at 30 P/E in 2001 when the market crashed and it has averaged closer to 16. Just curious if anyone knows what the PE value of the market was when it hit the bottom which I believe was around a 50% loss in 2002 or 2003. Was the PE below the historical average of 16 at that time? This was before my investing really started and it would seem the PE would have been so low that anything below 16 would have been attractive for purchase back in 2003.

What level is the P/E currently at?

Thanks

Karl said...

I don't have the historical facts at my fingertips, but the "dot com" boom was in full force in the late 1990s & 2000 ... some of the PE ratios were absurd ... into the hundreds.

They were "justifying" these high ratios as they were using measurements on many of these tech companies because of "increasing click counts" !! In the meantime, many had meager or no net earnings.

Brinker gets a lot of criticism but when he made his call in early 2000 to move a big percent of our portfolio to Money Market Funds (as I recall we got back to investing in April 2003) that saved me a lot. And the market did drop about 50% by the end of 2002 ... terrible time for sure.

So, if the value of the S&P dropped about 50% that would mean the PE Ratio would drop from around 30 back to the teens.... so the PE on a broad basis is a reasonable measure to consider among others.

Mad as HELL! said...
This comment has been removed by a blog administrator.
Biker said...

Here are some historical quotes from Marketimer:

January 2000: "Although the S&P 500 Index has been unable to exceed its July 1999 record multiple of 28 times operating earnings, the Nasdaq 100 has rocketed to multiples heretofore unheard of in the investment world. We estimate the QQQ shares, which represent the Nasdaq 100 Index, are trading at over one hundred times Year 2000 estimated earnings. We believe valuation levels in the U.S. market are stretched to the limit."

May 2003: "The stock market is a forward looking mechanism, and the general rule is that investors begin to look ahead to next calendar year earnings prospects during the summer months. Based on the Marketimer estimate of %52.00 for Standard and Poor's 500 Index operating earnings for 2004, the index now trades at a price/earnings ratio of 17.6."

Ruyfa said...

Does Bob ever make any comments on the municipal bond market?

Jerrod Clarkson said...
This comment has been removed by a blog administrator.
MK said...

There are three traditional measures of stock value: Book value, PE Ratio, Dividend yield. PE ratio is only one. The problem with PE it? Earnings are whatever a company claims them to be. A lot of footnotes and definitions tag along with the number. A lot of folk use FCFY (free cash flow yield) instead cause it's harder to lie about (I use this).

Also, the PE ratio for the "whole" market is meaningless to any individual stock. For example, WMT stock's PE is 18 right now. There is always value in the stock market even when the market as a whole is painfully expensive (like today). Index funds, not only being more expensive to own than individual stocks, requires one to buy expensive stocks along with value stocks. Assuming one is going to use PE ratio as their target.

Jerrod Clarkson said...



KC asked:

"What level is the P/E currently at?"


KC,

As of 5/26/17, the S&P P/E estimate (based on trailing twelve month “as reported” earnings is 25.55


Below are extracts from a table comparing annual January 1st S&P 500 ratios:

Oldest to Newest:
from: Jan 1, 1871 P/E: 11.10
to: Jan 1, 2017 P/E: 24.06

Based on Data from Years and Covered in the the Table:
Jan 1, 1018 = Lowest Jan 1 P/E: 5.72
Jan 1, 2009 = Highest Jan 1 P/E: 70.91


Link to S%P 500 P/E ratio by Year Table:

http://www.multpl.com/table

JC

Unknown said...

"What level is the P/E currently at?"

The 12-month forward P/E for the S&P 500 is 17.89.

gabe said...

Well, 2 days left to sell in May.......

Gabe

Bob (not THAT Bob!) said...

Hi Bob,

My net worth is $282.5267 million,(give or take).

Should I invest in goat futures?

https://goo.gl/CJlG95

Anonymous said...

I mentioned the Shiller PE ratio (see www.multpl.com). Wait another year, as the 10 years moving average for earnings improves since the time window will be from 2009 to 2019. 2007 and 2008 were terrible years for earnings.

BTW, look at Disney stock. P/E ttm is steadily going down as price remains constant. Examine its movie line like Pirates of the Caribbean. The latest Pirates took in about $250 million this weekend, its opening weekend. It cost $250 million to make and advertise/market/distribute. Its all profit now for Pirates. Glad I bought it back in 2009.

I am glad I bought the vice stock Altria. I see down here in the Deep South how vape products are booming even among those that have never smoked. Glad I bought Altria back in 2009.

Any thoughts on oil ? Seems like there is more downside risk dropping oil from $50 to $25 a barrel due to American oil driller activity.

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gabe said...

Amazon diid well in spite of pulling back from 1000!

Gabe

Poor Slob Bob (going BK in CA) said...

Honeybee,

Kellyanne Conway, her hubby George and the kids are moving into new diggs in D.C. Once they get settled she plans to become somewhat of a social butterfly.

I mention this because their new house cost only $7.8 million. Do you think their net worth would be high enough to gain admittance for an on-air consultation with Bawb, host of the Lottsa MoneyTalk show?

http://www.marketwatch.com/story/kellyanne-conway-plans-to-play-hostess-at-new-78-million-dc-home-2017-05-30?siteid=rss&rss=1

KC said...

Hey all,

So I heard a couple different answers to my "current P/E ratio" question. JC had it at around 25 but Randall had the "12 month forward P/E" at closer to 17. seems like a big difference and maybe it has something to do with the the word "forward" P/E.

Any clarification for me out there? Appreciate all the info being shared (and Honey's maintaining this site)....makes up for the lack of a "live" show this week.

Regarding the question about oil.......I have been a buyer during recent dips below $50. Why? Well because I think with Trump in office, his friendship with the Saudis and Russia....who rely on oil prices being high to make their fortunes......oil will hold its value and go up. Thoughts?

Jerrod Clarkson said...

KC,

Here is a good explanation of the two methods of expressing P/E ratios (from Investopedia):

http://www.investopedia.com/ask/answers/050115/what-difference-between-forward-pe-and-trailing-pe.asp

JC



Bluce said...

KC: See Wiki's explanation of price-earnings. And there are plenty of other sites that explain it.

Good luck with oil (or any other commodity).

Jim said...

The P/E as of May 26 was 17.6 according to where I get my information:
https://www.factset.com/earningsinsight

Anyone who currently has the P/E 25 or higher is probably quoting the Shiller P/E which some follow but Brinker does not.

Biker said...

KC,

Here is an explanation of two methods of quantifying earnings:

https://www.briefing.com/investor/Learning-Center/Ask-An-Analyst/what-is-difference-bewteen-reported/

BB generally cites future estimated P/E, based on operating earnings. Big differences in P/E are likely if one calculation uses reported earnings vs. the other using operating earnings. (I would recommend avoiding such apples and oranges comparisons).

This article discusses the present trends in trailing and future operating P/E (apples and apples comparison):

https://www.seeitmarket.com/2017-sp-500-operating-earnings-outlook-estimates-lowered-stocks-16602/

The numbers in the article above seem consistent with those in the Earnings Insight Factset cited by Jim. So I believe the 17.6 12-month forward P/E given in the Factset is an operating P/E estimate, although I didn't see a clear statement of such in the document.

Anonymous said...

Multpl.com has s+p 500 pe ratio at 25.5 based on trailing 12 months earnings.

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gabe said...

Jim- May 26 entry is correct!

Gabe

Anonymous said...

Reply to MK,
I understand the disadvantages of index funds but I used them extensively while I was in the workforce. I had neither the time nor the inclination to research stocks. Retired now, I live comfortably. Some may be geniuses at picking stocks, they may also enjoy the challenge. I am a firm believer that an investors greatest ally is time. Start early. No need to be tortured by the up and down turbulence of stock picking. But if you enjoy it, do it.
Vigilant

Bluce said...

KC said: Appreciate all the info being shared (and Honey's maintaining this site)....makes up for the lack of a "live" show this week.

Dittoes to that!

Here's hoping that when (if?) Bobby finally retires and MT is nothing but a distant memory, Honey will keep this blog open!

Just reminiscing about all the condescending things Bobby has said over the years, not to mention slamming the phone down on callers, will keep this blog busy, lol.

Anonymous said...

Oil, gold and silver could be used as a hedge against currency inflation (i.e., QE) and geopolitical uncertainty. A major part of the social pain in Venezuela is because oil dropped below $70 a barrel and Venezuela can not effectively function as a socialist country. Essentially socialist Venezuela needs expensive oil (which is essentially a "transfer payment" from countries in Western Europe, North America, Asia, etc. to Venezuela).

Back in 1986, West Texas Intermediate (WTI) was $11.35 a barrel. Applying a 3% inflation rate, that means oil could be 2.5 x $11.35 or $28.38 a barrel under the same economic and geopolitical conditions. However, right now WTI is about $50 a barrel.

source: https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RWTC&f=D

Examine how North American rig count ("frack you") has doubled over the last 12 months. Perhaps there is an ongoing oil trade war.

https://ycharts.com/indicators/us_oil_rotary_rigs


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Anonymous said...

Think of the trends out there in the USA which are taking hold in China. Are the Chinese buying cars like the American Millennials ? Are the Chinese hooked on social media like the Millennials ? Are Chinese malls dying like American retail is dying ? Just do a search under today's news for Michael Kors and Payless Shoe Stores.

Invest with the trends, not against them. Think like Alvin Toffler, Warren Buffett, and Peter Lynch combined.

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gabe said...

Bluce: I agree that Bob has been rude, argumentative and very defensive,intermittingly throughout the years
however, I myself, have learned a great deal from him. In my opinion, he is is knowledgeable, current and informative. I've listened to Bob since the very early eighties and I must say that I reached critical mass because of my listenership. For whatever its worth!

Gabe

MK said...

Anon, I had neither the time nor the inclination to research stocks. Retired now, I live comfortably. Some may be geniuses at picking stocks, they may also enjoy the challenge. I am a firm believer that an investors greatest ally is time. Start early. No need to be tortured by the up and down turbulence of stock picking. But if you enjoy it, do it.

I'm retired comfortably too, living off investments. Hey, we sound like BB callers! For the record, I think index funds are fine IF dollar cost averaging religiously over a decade. The problem is, 99% of people don't or can't do this. I sure can't since my income stream is too irregular.

I also think people who try to "time" the stock market using index funds and the stock market's PE ratio take on a bolder challenge than those who "pick stocks" based upon objective criteria.

Remember, owning 20+ diversified blue-chip stocks on a 2-5 year time horizon based upon objective criteria is not what most view as "picking" stocks. It's not random, has a better track record than index funds, and the choice of the "pick" based upon objective criteria can be purchased at less expense than a mutual fund costs to own (say IQT or equ.). I do agree it's somewhat more work. But it is also safer in bull market peaks when the market seems wildly overvalued based on historical standards.

gabe said...

S&P up 1.2% in May!

Gabe

Honeybee said...

.
Thank you for that report on the S&P, Gabe!

gabe said...

HB: My pleasure!

Gabe

Jim said...

Through the end of May the leading bond funds YTD continue to be Long-Term bond funds.
They are currently beating junk bond funds, low-duration bond funds,and "unconstrained" bond funds.

Honeybee said...

.
Jim....So we know that Bob Brinker's move to short-duration funds (even with the adjustments into those that contain junk) in 2013 was a total return mistake.

That won't stop him from pulling his chain for "being right" when interest rates finally do go up.

COVFEFE

Jim said...

Honey said:
Jim....So we know that Bob Brinker's move to short-duration funds (even with the adjustments into those that contain junk) in 2013 was a total return mistake.

That won't stop him from pulling his chain for "being right" when interest rates finally do go up.

COVFEFE


If interest rates go up later this year I would expect Brinker to mislead listeners by saying he lowered his duration back in January. He will never mention he lowered it in 2013. Remember, back in January he sold DoubleLine Total Return and divided the proceeds among the remaining three bond funds, so by saying he lowered his duration in January 2017 it will make him look like a savvy investor.

Jerrod Clarkson said...

Jim said:

"...so by saying he lowered his duration in January 2017 it will make him look like a savvy investor".


Or, a charlatan, thanks to Honeybee, the BRT and all of the astute bloggers here.

JC

gabe said...

Favorable employment data = a higher stock market!

Gabe

Anonymous said...

Looks like Walmart is looking at more innovative methods to compete with Amazon and in the e-commerce market space.

Check the news for this headline: Walmart is asking employees to deliver packages on their way home from work

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gabe said...

The job number tomorrow should be a good one given the good ADP report.

Amazon is so far ahead of Walmart in the e-commerce market space. Rummaging through Wally World yesterday, I was amazed how poorly stocked they were and their high prices compared to local retailers and grocery chains.

Gabe

Anonymous said...

Sounds like Gabe is providing anecdotal criticism of Walmart as an Amazon stock holder.

Reading about Venezuela and the concept of productivity (i.e., output divided by input). How low will it sink ?

AD

MK said...

Walmart is making huge cash right now. It's a great buy since the price is very low for no good reason. And most importantly, it's "out of season" in the media and the public. Just like MCD 20 years ago. People are like that; rather than buy low sell high, they buy high (AMZ) and sell low (WMT). But objectively in the business world, Walmart is kicking butt:

ROIC = 10%
FCFY = 7%
DivYld = 2.61%
Payout = 46%
PE = 18
BkVal = 19

WMT is currently 78. It wouldn't be "overvalued" based on historic trends until it crossed 400; it is undervalued anywhere below 82. I'm getting ready to buy some if it falls a bit more.

Btw, I LOVE Amazon (the store not the stock). Do most of my shopping there, actually, and haven't shopped at WMT in years.

gabe said...

Jobs report....Yikes!


Gabe

Dark Shadows(1966) said...

Walmart price matches advertised prices of brand name products from local stores.. Download the app, sign up, and scan your receipt.

Honeybee said...

.
Gabe...Now find out what happened to U6 and report that to us.

gabe said...

HB: May U6 was 8.4% down from April 8.6%. That is good!

Gabe

gabe said...
This comment has been removed by a blog administrator.
gabe said...

Well....the 10 year has a 2.15% handle. Still early in the day. The pros at CNBC tell us that The Fed will still raise.

Gabe

gabe said...

Dark Shadows (1966) I rather fall out of bed and shop locally than go to a shopping Center and deal with the traffic!

Gabe

Honeybee said...

.
Some of you already do it, but I'd like to ask a favor that everyone who is making muliple comments at the same time, put them together in one note. I'm sure you can find a way to differentiate them, if that is what you want to do.

Each time I receive, examine and publish a comment, check that it went through, and delete the original and confirmation, it takes time and is extra work for me.

Thanks in advance.

gabe said...

All three (3) major indices at record closings. Given this Market's performance, I decided to take some profits both in my equity fund holdings and individual equity holdings. Bonds also did very well today.

My thought is that the Market is frothy and time to take some off the table.

Gabe

MikeE said...

I wish I could do the same Gabe, but I would have to pay too much taxes due to large profits in my funds.

gabe said...

MikeE: My thought is that I would prefer to pay the taxes rather than to risk loosing the profit.

Gabe

Anonymous said...

rasputin here. Gabe that's losing not loosing. Still my hero.

MikeE said...

Yea Gabe, I have toyed with that idea for years but I sure would hate to have to pay 2-3 hundred thousand in taxes. I have always rode it out. Bob says don't pay taxes before you have to.

gabe said...

Ras: I've got a job for you...a spell checker! My defense----a typo! Have a good weekend!

Gabe

Jerrod Clarkson said...

Interesting article/chart.

In particular, I am astonished by the short-term performance differential between Foreign Reits and US Reits. The US Retail Reits poor performance are doubtess contributory.

http://www.capitalspectator.com/major-asset-classes-may-2017-performance-review/

JC

gabe said...

VWIAX received a good report in today's Morningstar!

Gabe