(snip)"******* S&P 500 FUNDAMENTALS ****************************
The real P/E for the S&P 500 is based on "as reported" or GAAP earnings
(calculated using Generally Accepted Accounting Principals), and it is the
standard for historical earnings comparisons. The normal range for the GAAP
P/E ratio is between 10 (undervalued) to 20 (overvalued).
Standard & Poors has introduced a version called "core" earnings, which is
more critical than GAAP and will probably become the standard in the future.
Market cheerleaders invariably use "pro forma" or "operating earnings,"
which exclude some expenses and are deceptively optimistic. They are
useless and should be ignored.
The following are the most recently reported and projected twelve-month
trailing (TMT) earnings and price/earnings ratios (P/Es) according to
Standard and Poors.
Est Est Est
2007 Q3 2007 Q4 2008 Q1 2008 Q2
TMT P/E Ratio (GAAP).......: 17.2 18.5 19.1 20.4
TMT P/E Ratio (Core).......: 18.5 N/A 18.5 N/A
TMT P/E Ratio (Operating)..: 15.1 16.0 15.9 16.0
TMT Earnings (GAAP)........: 78.60 72.86 70.53 66.15
TMT Earnings (Core)........: 73.10 N/A 73.10 N/A
TMT Earnings (Operating)...: 89.31 84.44 84.80 84.19
For a more thorough discussion of earnings and other fundamentals
click here.
Based upon the latest GAAP earnings the following would be the approximate
S&P 500 values at the cardinal points of the normal historical value range.
They are calculated simply by multiplying the GAAP EPS by 10, 15, and 20:
Undervalued (SPX if P/E = 10): 786
Fair Value (SPX if P/E = 15): 1179
Overvalued (SPX if P/E = 20): 1572
"(snip)
By this value analysis, even though the S&P 500 has already fallen from the 1500 to 1350 ballpark, it's still significantly overvalued (= overpriced).



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