Mass delusions are not rare. They salt the human story. The hallucinatory types are well known; so also is the sudden variation called mania, generally localized, like the tulip mania in Holland many years ago or the common-stock mania of a recent time in Wall Street. But a delusion affecting the mentality of the entire world at one time was hitherto unknown. All our experience with it is original.

- Garet Garrett, 1932

Gepost in 30 08 10 door Steven op maandag 30 augustus 2010

The Decline of the P/E Ratio

Consider that while P/E ratios dropped during the inflationary 1970s, they also fell during the deflationary 1930s. The one common thread tying those two eras of falling P/E ratios: unpredictable economic performance.

“We’re looking at a more volatile U.S. economy than we experienced in the last 30 years,” said Doug Cliggott, U.S. equity strategist at Credit Suisse in Boston. “The pressure on multiples may be with us for quite some time.”