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The S&P's GAAP P/E Ratio Rises Above 19X

Tyler Durden's picture




 

Goldman may have been right that there will be no more multiple expansion in 2015, but there sure was quite a bit overnight thanks to the latest verbal and actual central bank interventions by the ECB and the PBOC. And as a result, the biggest beneficiary is the S&P500, which is set to open just around 2070, or about 30 points shy of Goldman's 2015 S&P500 year-end target.

And for those who still care about such things, the chart below shows that fundamentally, the S&P is now trading at 17.5x non-GAAP LTM EPS, and, drumroll, 19.2X GAAP PE!

At the current daily pace of increase, David Tepper can finally pop that champagne bottle early next week, because his long-held dream of a 20X P/E (GAAP that is) will have finally materialized (he may have to wait until Christmas for 20x non-GAAP).

And all it took was the coordinated intervention of every single developed and developing central bank.

 

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Fri, 11/21/2014 - 10:35 | 5473499 SickDollar
SickDollar's picture

I understand that the market loves to debate P/E. However, the attempt to correlate PE (or its inverse, the Earnings Yield, EY) to any bond yield, whether Baa or Treasury or whatever) has always seemed curious to me. It appears to me that the Dividend paid on a stock is conceptually more analogous to a bond coupon than is the Earnings.

in short it is all BS

Fri, 11/21/2014 - 10:44 | 5473545 The Most Intere...
The Most Interesting Frog in the World's picture

EY and DY are probably both useful to a degree in providing historical context.  Bottom line is what happens when earnings decline?  ...if they are permitted to do so?

Fri, 11/21/2014 - 13:14 | 5474122 KnuckleDragger-X
KnuckleDragger-X's picture

Declining earnings are what non-GAAP is for, chrome plating on a dog turd.

Fri, 11/21/2014 - 10:35 | 5473500 The Most Intere...
The Most Interesting Frog in the World's picture

If memory serves me this was the PE when the market topped in 2007.

Fri, 11/21/2014 - 10:43 | 5473537 tarsubil
tarsubil's picture

All we need is a stiff wind and this shit pile finally falls over. They can't stack fast enough to keep it up.

Fri, 11/21/2014 - 10:54 | 5473588 Rainman
Rainman's picture

October 2007 the forward S&P p/e was 15.3 , well below the 5yr and 10yr averages

            http://www.factset.com/insight/2013/3/earningsinsight_3.15.13#.VG9QXhEtCUk

Fri, 11/21/2014 - 11:02 | 5473621 The Most Intere...
The Most Interesting Frog in the World's picture

That is forward PE and I do not believe it was based on GAAP projected earnings. Look up GAAP trailing 12 months (which is what is referenced in this article) at the 2007 top. That would be apples to apples with this article.

Fri, 11/21/2014 - 10:37 | 5473510 Keltner Channel Surf
Keltner Channel Surf's picture

Increasingly, pundits are describing the economic and market scenarios as Goldilocks.

Hard to disagree   -- an ignorant, oblivious, doe-eyed youngster surrounded by frustrated, hungry bears.

Fri, 11/21/2014 - 10:47 | 5473562 Max Damage
Max Damage's picture

What again?

Fri, 11/21/2014 - 10:37 | 5473512 khakuda
khakuda's picture

Just because there shouldn't be more multiple expansion, doesn't mean there won't be.  Nearly daily stimulus announcements globally are not helping earnings grow, they are just causing PEs to rise every higher.  As long as the market keeps rising to central bank talk and action, PEs will rise.  To talk about the right PE in a global credit bubble, at least in the short term, is a waste of time.

Fri, 11/21/2014 - 14:20 | 5474375 sun tzu
sun tzu's picture

Its a matter of time. Top and bottom lines keep revising down as stock prices keep increasing. The same thing happened in 2007

Fri, 11/21/2014 - 10:38 | 5473513 ParkAveFlasher
ParkAveFlasher's picture

GAAP - as in generally accepted ass-reaming punditry.  We all know what is happening on all corporate balance sheets in existence, because that is the implication of faith in data. 

Fri, 11/21/2014 - 10:39 | 5473528 Dr. Engali
Dr. Engali's picture

"Fundamentals", now there is a quaint word dug up from the past.

Fri, 11/21/2014 - 10:41 | 5473530 Tenshin Headache
Tenshin Headache's picture

Goldman's target is 2150, not 2100.

Fri, 11/21/2014 - 11:20 | 5473690 Tyler Durden
Tyler Durden's picture

"S&P 500 will rise to 2100 at year-end 2015 for 5% total return"

 

" Our S&P 500 year-end 2015 target of 2100 implies a modest 5-10% P/E multiple compression to 16.0x our top-down 2016 EPS estimate or 14.6x bottom-up consensus earnings estimates."

Fri, 11/21/2014 - 12:57 | 5474067 FMR Bankster
FMR Bankster's picture

EPS of $150 in 2018. Wonder how many times earnings have gone up 9 years in a row without declining? Without any data in front of me here's my guess, never. But, what the hell this is Goldman Sacs.

Fri, 11/21/2014 - 14:16 | 5474359 Bunga Bunga
Bunga Bunga's picture

If all went well since 1999 we would be all rich.

Fri, 11/21/2014 - 13:00 | 5474068 FMR Bankster
FMR Bankster's picture

Ops, I forgot, history doesn't matter.

Fri, 11/21/2014 - 13:16 | 5474131 KnuckleDragger-X
KnuckleDragger-X's picture

" Our S&P 500 year-end 2015 target of 2100 implies a modest 5-10% P/E multiple compression to 16.0x our top-down 2016 EPS estimate or 14.6x bottom-up consensus earnings estimates."

The wolves have a consensus on the sheep....

Fri, 11/21/2014 - 10:40 | 5473532 thismarketisrigged
thismarketisrigged's picture

you would fucking think with all the bullshit these asshole central bankers pull off on a daily basis, that there would be at least 1 or 2 days every now and then, in which the ''market'' also drops fucking 2-3 percent in a day, but of course the only time the s&p is ever down, its down like 0.01 percent, and then its liftoff again.

 

this whole thing is such a mother fucking joke, i dont know what to say anymore.

 

 

Fri, 11/21/2014 - 10:50 | 5473577 scubapro
scubapro's picture

 

that would interfere with the muppet training.    3% down? buy it!   10% buy it faster?   energy stocks dip? buy it!  Do not every sell b/c you will miss the next 5%.   and there is not downtrend unless oct 15 is broken.....so there is a 15% 'harvest' on the offing--while the muppets are trained to take the other side for the first 20% down!  

Fri, 11/21/2014 - 10:42 | 5473535 Glass Seagull
Glass Seagull's picture

 

 

PBOC trying to sell more Chinese goods to US consumers during the holidays via the much-lauded wealth effect.

 

US long bonds don't give a fuck.

Fri, 11/21/2014 - 10:58 | 5473609 The Most Intere...
The Most Interesting Frog in the World's picture

So right now the the 10 yr is at 2.324.  Double that is 4.648 which implies a PE of 21.368 and takes us to 2,340 on the S&P 500.  If earnings/share hold and or go up from here and the 10 yr drops to say 1.5% that would compute to 3,649 on the S&P 500.

Do US long bonds not give a fuck, fortelling an economic crash, or is there just so much currency in the system that it is trying to land somewhere, anywhere, that bond and stock prices will continue to climb?  I am more and more afraid that it is the latter.  

Fri, 11/21/2014 - 10:44 | 5473551 yogibear
yogibear's picture

Year end Wall Street bonuses have to be juiced.

Make it big.

Fri, 11/21/2014 - 10:46 | 5473556 TomB
TomB's picture

FWIW, Martin Armstrong believes the Dow has the potential to hit 23 000 to 26 000 by September 2015.

Fri, 11/21/2014 - 11:03 | 5473633 The Most Intere...
The Most Interesting Frog in the World's picture

Certainly that is possible.  If interest rates continue to fall and earnings stay where they are or expand.

Fri, 11/21/2014 - 11:15 | 5473672 Spungo
Spungo's picture

This market still has plenty of cash on the sidelines - money in retirement accounts that can be stolen through negative interest rates to fund stock repurchases.

Fri, 11/21/2014 - 11:43 | 5473791 wagthetails
wagthetails's picture

permenantely high plateau

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