RE:RE:RE:RE:RE:RE:RE:RE:s&p futures are way downMayorRobFord wrote: That's right, VIX futures are well overpriced considering the current cash VIX. There is a lot of risk already built into the prices at any given time, January futures are already over 20. Expiry in a few days and the futures are still well above the cash VIX. On P/E ratios, during the tech bubble, it was over 40, while now it is a modest 26, when the Feds are supporting prices at unprecented levels since before the Great Depression. Make no mistake, the market is still very cautious, there ain't no bubble about to explode for probably more than a year. We already had big corrections over the last 12 months.
https://www.barchart.com/commodityfutures/CBOE_S%26P_500_VIX_Futures/VI
We doesn't have any correction in the last 12 months, we have low and high but no correction.
A normal ratio for a well positioned compagny is 10, not 20 considering the risk. On private market, it's often 1 or 2, maybe 3 times the earning ! Put things in perspective, it's far from realist to keep ratio at 20 with this low-growing world economy. In other words, you can expect for a well grown enterprise to grow it's current revenu by 5 % (PE 10 = 10% per year on 10 year, PE 20 = 5 % per year on 10 year and if you take 10 % and you remove 5 %, it's mean you "pay" now for a growth of 5 % per year on 10 year.) when the world have difficulties to achived 2 % or even 1 % !
Just to remake the calculaton above.
Normal(good) investment quality revenu is 10 % per year.
Normal(good) investment quality are calculated on 10 year.
PE of 20 give a revenu of 5 % per year.
If your supposed to make 10 % and you are getting 5 %, it's mean that you pay 5 % now to have a stock that "soon" will have a PE of 10 justifiing the 10 % per year revenu so you are expecting 5 % of growth or more per year on the balance sheet...
For the PE arround 40, do you remember what people thinked on the Internet ? That it's was a way to have infinite growth and possibilities on a finite world ? This perspective created the PE of 40 or event all theses business worth a load of money but aren't making any... And finaly the crash... I highly dought we will have any ration near that until we will start the space colonisation/exploration and retrive the infinite world of our imaginations...
For the FED, they are stating to talk about stoping the QE the way it's made right now and starting to give the money directly on americain's bank account... #Loretta Mester