Once inflation started creeping into the economy, interest rates soared and earnings multiples took a tumble. However, once Paul “Big Paul” Volcker squeezed inflation from the economy, multiples slowly resumed their climb back to JFK levels. The problem with that analysis, of course, is that you’re adjusting for a heck of a lot of data. So has the normal level for P/E Ratios been around 18 or so for the past 50 years with the inflation era as an aberration? Or are there natural 15 to 20 year periods of multiple expansion and compression? I lean toward the first, but I’m far from certain. CrossingWallStreet.com: Happy Birthday Mr. Bull! I like reading places where experts can’t decide what perspective to take and wrestle with their instinctive findings. I also like reading economic/market-factors posts where I think I’ve learned something rare but in fact I barely understand it beyond the fact it is in English and uses proper grammar (mostly). S-M-R-T, smart.
Once inflation started creeping into the economy, interest rates soared and earnings multiples took a tumble. However, once Paul “Big Paul” Volcker squeezed inflation from the economy, multiples slowly resumed their climb back to JFK levels. The problem with that analysis, of course, is that you’re adjusting for a heck of a lot of data. So has the normal level for P/E Ratios been around 18 or so for the past 50 years with the inflation era as an aberration? Or are there natural 15 to 20 year periods of multiple expansion and compression? I lean toward the first, but I’m far from certain.

CrossingWallStreet.com: Happy Birthday Mr. Bull!

I like reading places where experts can’t decide what perspective to take and wrestle with their instinctive findings. I also like reading economic/market-factors posts where I think I’ve learned something rare but in fact I barely understand it beyond the fact it is in English and uses proper grammar (mostly). S-M-R-T, smart.

Notes