The PE10 nears its 80 Percentile - S&P 500 cyclically adjusted PE (PE10 or CAPE) – September 2010 Update

Standard and Poors is showing, with 99% of earnings data available, that the Q2 2010 earnings per share for the S&P 500 will be $19.68. That’s a long way from the -$23.25 we saw in Q4 2008. This then has Standard and Poors all excited as they are now estimating that earnings for Q2 2011 will be $21.43 which is a year on year increase of 9%. So no predictions of a double dip recession there.

Why in this world do people always continually assume that because you have earnings of x this time that next time earnings will be x + 10% or so? My company does the same. You have a great year this year so the expectation is that next year you will have a great year plus another 10%. They do the same thing with turnover targets. To me this just seems nigh on impossible as eventually you end up so far up the exponential growth curve with it compounding year on year that you are almost destined for failure. Also where is this additional growth coming from? The world is not growing at 10% so the assumption must be that you are taking market share from someone else. But with the S&P 500 you have on average 500 companies all growing earnings by 9%. That doesn’t seem sustainable. I guess a good example of this is Nokia and the rise in competition from Apple and also the Android Operating System phones. I wonder if Nokia’s board was up until a couple of years ago forecasting this never ending exponential growth also? Now the flavour of the month is Apple but for how long?

Global Capitalist - My Asset Allocation

Back in August I introduced the concept of readers posts so that different perspectives other than those that I post and the comments that are posted in response could be seen.  So far only one person has taken up the challenge which is a shame because different perspectives was one of the outputs that I had hoped to achieved on this blog rather than just me talking to myself.  These different perspectives would allow us all to head off and do our own further research which could only be a good thing.  The person who has taken up the challenge is Global Capitalist who's previous post is here and who today discusses personal asset allocations.

Look further than the press releases – UK Property Market – August 2010 Update

If you were reading the papers over the last few days you will have probably seen the house price data from the Nationwide reported on. This will have been taken straight from their press release and I’m sure monthly changes of -0.9% will have been mentioned. I however prefer to analyse the raw data as the figures presented to the press are seasonally adjusted. The actual figures are worse than that reported. In July 2010 prices were £169,347 and in August they are now £166,507. That is a fall of 1.7% in a single month with the annual change now at +3.9%. This is now 2 months in a row that we have seen price falls. This is all shown in my 1st chart today.

The low fee mantra – a look at the results of Hargreaves Lansdown

Firstly an apology to regular readers of Retirement Investing Today. My life outside of this blog has recently become extremely busy. It’s going to take me a couple of weeks to get everything sorted out which unfortunately means for the next couple of weeks posts are going to be very sporadic if I manage any at all. Please bear with me as once everything is back in control the regular posts will reappear.

Alternatives to NS&I Index Linked Savings Certificates? – July 2010 Update

The Retail Prices Index (RPI) is currently sitting at 4.8% while the Consumer Prices Index (CPI) is at 3.1%. It is highly likely that if you are holding any cash in bank accounts that you are therefore seeing your hard earned cash being slowly devalued. I know I am. Firstly let’s look at my chart for today. This shows that if you’re prepared to lock your money up for greater than 2 years then on average you can get around 3.7% gross. If you’re a 20% taxpayer then that means a net return of 2.96% and if you’re a 40% taxpayer then unfortunately your net return is 2.22%. Both of these values are less than both the CPI and the RPI meaning on average people’s savings are still being eroded. Provided inflation keeps tracking at these types of year on year percentages then the average rates after tax seem to be well behind the deal that was being offered by NS&I Index Linked Savings Certificates (ILSC’s). If you’re not sure how the returns were calculated on ILSC’s then have a look here.