Today it looked like the NYSE might recover from Monday's 588 point fall. About lunch time the Dow was up 350 points from opening. Then something happened, and most of the 350 points went away, leaving the Dow about where it was Monday night (in deep doo-doo). Shepherd Smith on Fox said a rumor of Chinese troop movements swept across the trading floor about 3 PM causing a wave of selling. Shep said the rumor was totally unconfirmed, but it did a job on the Dow before close at 4PM.
Wall St Journal said the overall price/earnings ratio was 25 on Thursday before the s*** hit the fan on Friday. As of Tuesday the price earning ratio was down but only to 23 which is still high. Historically, going back to the Civil War, price earning was about 11. Rule of thumb used to be buy stocks with a P/E less than 12, and sell anything with a P/E above 24. It may be that this market disaster happened when all the computer programs decided to sell 'cause the P/E was as high as it could go, why not cash in?
Anyhow, with an average P/E of 23, the market can go down a long long way before it gets to 11.
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