More on Roubini and Shiller's Dour Outlook
by: Market Folly March 12, 2009
Shiller has a set of S&P earnings and P/E ratios available in spreadsheet format here.
First, real S&P composite earnings:
And secondly, historical P/E ratios and interest rates.
By that historical data, you'd think that a 5 P/E could be achieved given the severity of everything that's happened. But, if you're not that apocalyptic, then maybe somewhere around 10x would be more appropriate. And, 'Dr. Doom' himself, Nouriel Roubini thinks that the S&P500 will see 600, which could be somewhat close to 10x by his measurement. Taken from Bloomberg,
The benchmark index for U.S. stocks would have to slump 12 percent from last week’s closing level to meet his forecast. Roubini is assuming that companies in the S&P 500 will report profit of $50 a share this year and investors will pay 12 times that for equities.
My main scenario is that it’s highly likely it goes to 600 or below,' Roubini said Thursday in an interview at the Chicago Board Options Exchange Risk Management Conference in Dana Point, California. A level of '500 is less likely, but there is some possibility you get there.'
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