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P/E ratio is declining and becoming irrelevant
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As investors fixate on the global forces whipsawing the markets, one fundamental measure of stock-market value, the price/earnings ratio, is shrinking in size and importance. More.
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Stay Hungry. Stay Foolish. - Steve Jobs
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As investors fixate on the global forces whipsawing the markets, one fundamental measure of stock-market value, the price/earnings ratio, is shrinking in size and importance. More.
Size and importance are two completely different things. Size typically reflects sentiment. Importance reflects correlation. To say P/E size is dropping is saying that sentiment is poor which may or may not be justified. To say that there is a drop of importance is saying that there is an over-reliance on ETFs. I don’t know if the two are connected, but they might be. That sets up a potential ETF bubble as correlation fatigue settles in.
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Read more at: Asymco Blog
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... That sets up a potential ETF bubble as correlation fatigue settles in.
I’ve this passing thought too.
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Stay Hungry. Stay Foolish. - Steve Jobs
