Current SP500 and Sector PE Ratios vs. Historical

I came across a very cool study from Bespoke Investments where they ran an analysis of current PE ratios for the SP500 and all of it's sectors and compared them to their performance since 1990.  You need a subscription of access the link. 

I can't give up too much as it's proprietary for paid subscribers but let's just say that when compared to the average PE ratio of the last 23 years current prices are not inflated when compared to current earnings.  PE ratios may be at 12 month highs but they are not anywhere near all time highs.  As a matter of fact most of them are still below their average for the last 23 years.

Dividends Are Keeping Pace With Prices

This is from the Crossing Wall Street blog.  In this post Eddy Elfenbein compares the increase in prices of the S&P to the rise in dividends over the last 25 years.  What the chart below shows is that dividends are keeping up with prices.  This seems to be another argument in favor of the market not being over inflated.  If you need more proof, take a look at the periods before the tech crash in 2000-2001 or the housing crash of 2008.

Guide to Stock Market Corrections (TBP)

It's been awhile since my last post.

I ran across this post on the Big Picture Website.  It is a succinct guide to stock market corrections.

A few tidbits.

• Since the end of World War II (1945), there have been 27 corrections of 10% or more, 12 of which had turned into full-blown bear markets (with losses of 20% +).

• This equates to one correction roughly every 20 months, according to Dow Jones index maven John Prestbo, who points out that this average does not mean they’re evenly spaced out. 25% of these corrections over the last 66 years occurred during the 1970′s (the Golden Age of Market Timers), another 20% occurred during the secular bear market of 2000-2010.

Bubble paterns

This piece was brought to my attention through John Mauldin.  It is actually a pretty good explanation on the anatomy of a bubble.  It is derived from the book by Charles Kindleberger titled Maias, Panics and Crashes.  There are a couple of cool charts included in the Mauldin article which sums things up nicely.