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Frank W · 07-21-2002, 07:01 PM

Here's a little analysis that seemed like it might be worth sharing...
The aggregate P/E for the S&P 500 is now at 34.1

P/E for the S&P bottomed out at 5.6 after the crash of 1929. This was an 83% drop from the P/E peak of 32.6

P/E for the S&P bottomed out at 8.3 after the crash of 1973. This was a 56% drop from the P/E peak of 18.7

The average P/E for the S&P for the 50 year period from 1950 through 1999 was 17.0.

Modeling the three scenarios - a 1929-magnitude market drop, a 1973-magnitude market drop, and reversion to the historical average P/E - projects the S&P falling to 492, 215, or 440 respectively.

So... best case is that the S&P heads down another 44% from where it is today before hitting bottom at 492. And it wouldn't be historically surprising to see it head down as far as 215.

Oh, and one more thing. The market took seven and a half years to return to its high after the crash in 1973, and TWENTY FIVE years to recover after the peak of 1929.

This is what you call a BEAR market. No...not the gay hairy man niche. The fucked up stagflation kind of bear.

07-21-2002, 07:01 PM
Frank W Confirmed User Join Date: Feb 2002 Location: California Posts: 889	Are we fucked? Here's a little analysis that seemed like it might be worth sharing... The aggregate P/E for the S&P 500 is now at 34.1 P/E for the S&P bottomed out at 5.6 after the crash of 1929. This was an 83% drop from the P/E peak of 32.6 P/E for the S&P bottomed out at 8.3 after the crash of 1973. This was a 56% drop from the P/E peak of 18.7 The average P/E for the S&P for the 50 year period from 1950 through 1999 was 17.0. Modeling the three scenarios - a 1929-magnitude market drop, a 1973-magnitude market drop, and reversion to the historical average P/E - projects the S&P falling to 492, 215, or 440 respectively. So... best case is that the S&P heads down another 44% from where it is today before hitting bottom at 492. And it wouldn't be historically surprising to see it head down as far as 215. Oh, and one more thing. The market took seven and a half years to return to its high after the crash in 1973, and TWENTY FIVE years to recover after the peak of 1929. This is what you call a BEAR market. No...not the gay hairy man niche. The fucked up stagflation kind of bear. __________________ "If you hate a person, you hate something in him that is part of yourself. What isn't part of ourselves doesn't disturb us." -- Herman Hesse Last edited by Frank W; 07-21-2002 at 07:02 PM..