The FTSE 100 Cyclically Adjusted PE Ratio (FTSE 100 CAPE or PE10) – October 2012 Update

This is the Retirement Investing Today monthly update for the FTSE 100 Cyclically Adjusted PE (FTSE 100 CAPE).  Last month’s update can be found here.

As always before we look at the CAPE let us first look at other key FTSE 100 metrics:

• The FTSE 100 Price is currently 5,911 which is 2.6% above the 03 September 2012 Price of 5,758 and 16.5% above the 03 October 2011 Price of 5,076.
• The FTSE 100 Dividend Yield is currently 3.70% which is a slight fall from the 03 September 2012 yield of 3.75%.
• The FTSE 100 Price to Earnings (P/E) Ratio is currently 11.43.
• The Price and the P/E Ratio allows us to calculate the FTSE 100 As Reported Earnings (which are the last reported year’s earnings and are made up of the sum of the latest two half years earnings) as 517.  They are up 2.3% month on month and down 17.7% year on year.  The Earnings Yield is therefore 8.7%.

A Comparison of UK House Prices (Formerly The Greater Fool UK House Price Index) – October 2012 Update

This is the monthly update that compares the various UK House Price Indices.  The previous update can be found here.  Since the last post I have engaged in some good debate with Retirement Investing Today readers which has then encouraged me to undertake some further reading around this topic.  This has resulted in this regular topic seeing a number of direction changes which you will notice as you read on.  The first of these is that from here on in this regular post will not be referred to as the Greater Fool Index.  This title encouraged emotion and an inherent bias.  This blog is not about either of those things and so I must drive the title back to one that is emotionless and mechanical.  Not quite as exciting I know but hopefully of more use for making the right investing decisions moving forward.

It’s also important to note that this topic is also a work in progress and is not yet mature.  Therefore as you’ve already done previously please feel free to comment on the analysis so that we can further improve the data for all readers.

Let us first look at the five datasets that will be used for ongoing analysis:

• The Rightmove House Price Index.  This index simply tracks the average asking prices of properties as they come onto the market.  This means it will be affected by price changes, if the mix of house type changes and if the mix of location changes for houses coming onto the market.  It is not seasonally adjusted and covers properties from England and Wales.  Asking prices in September were £234,858 which month on month is a fall of 0.6% and year on year is an increase of 0.7%.
• The Acadametrics House Price Index.  This index is new for this blog and uses the Land Registry dataset.  It mix adjusts this dataset to take a constant proportion of property types, from a constant mix of geographic areas.  It is seasonally adjusted and covers properties from England and Wales.  It covers buyers using both cash and mortgages.  Buying prices in September were £225,374 which month on month is a small fall of 0.1% and year on year is an increase of 2.2%.
• The Halifax House Price Index.  This index is based on buying prices of houses where loan approvals are agreed by Halifax Bank of Scotland.  It uses hedonic regression to remove type and mix variations thereby measuring the price of a standardised house.  I use the non seasonally adjusted dataset and it covers the complete United Kingdom.  Sales prices in September were £160,437 which month on month is a rise of 0.2% and year on year is a fall of 1.2%. 
• The Nationwide House Price Index.  This index is very similar to that of the Halifax except it is based on buying prices of houses where loan approvals are agreed by Nationwide Building Society.  Sales prices in July were £163,964 which month on month is a fall of 0.5% and year on year is a fall of 1.4%. 
• The Land Registry House Price Index.  This index uses repeat sales regression on houses which have been sold more than once to calculate an increase or decrease.  This is then combined with a mean price which was taken in April 2000 to calculate the index.  It is seasonally adjusted and covers properties from England and Wales.  It covers buyers using both cash and mortgages.  Sales prices in August were £163,376 which month on month shows no movement and year on year is an increase of 0.7%. 

The S&P 500 Cyclically Adjusted PE (aka S&P 500 or Shiller PE10 or CAPE) – October 2012 Update

This is the Retirement Investing Today monthly update for the S&P500 Cyclically Adjusted PE (S&P 500 CAPE).  Last month’s update can be found here.

As usual before we look at the CAPE let us first look at other key S&P 500 metrics:

• The S&P 500 Price is currently 1,435 which is 0.6% below last month’s Price of 1,443 and 18.8% above this time last year’s Price of 1,207.
• The S&P 500 Dividend Yield is currently 1.97%.
• The S&P As Reported Earnings (using a combination of actual and estimated earnings) are currently $88.87 for an Earnings Yield of 6.2%.
• The S&P 500 P/E Ratio is currently 16.2 which is down from last month’s 16.3.

Guest Posting on Monevator

Today I’m guest posting the 2nd Private Investor Market Roundup on Monevator.  The workload that goes into that post means there won’t be a mid week post on Retirement Investing Today.  The Roundup covers Quarter 3 2012 and in my usual non-emotional fact based analysis is looking at:

• The stock markets of the top 10 countries by GDP including pricing (both nominal and real), P/E and Dividend Yield.  The countries are the US, China, Japan, Germany, France, Brazil, UK, Italy, Russia and Canada.
• The nominal and real HaliWide Index which is the average of both the Halifax and Nationwide House Prices Indices.
• The nominal and real performance of commodities including Gold, WTI Spot Crude, Soyabeans, Copper and Natural Gas.

The Retirement Investing Today Low Charge Strategy and Portfolio

This blog is fast approaching its third anniversary.  In my first naive post I laid out in very brief terms “what” some of my investing strategy was about having developed it from the decision to go DIY in 2007.  This post also briefly described “why” I was taking the road I had chosen.  Soon after I laid out in detail the construction of what I called My Low Charge Investment Portfolio.  To this day I have continued to improve on the original portfolio methodology ever so slightly while holding true to the fundamentals of the strategy.  Since October 2009 that strategy and portfolio has seen my net worth increase by 73% in nominal terms.  Additionally, since October 2007 my net worth has increased by 306%.

Since that first post I have made 239 posts covering many topics.  If you’re interested some of the latest or most popular can be found in the sidebar.  Every post can also be found in the blog archive also found in the side bar.  While it’s all there as a fully accountable record I’m going to use today’s post to bring a number of my key fundamentals which cover strategy, portfolio and portfolio rebalancing into one single aide memoir.

Retirement Investing Today Strategy

The strategy is set around a decision to retire as early as possible.  It’s important to note that retirement for me does not mean a life of leisure.  It simply means that work becomes optional.  I may choose to stay in my current career, may start a new career which could involve voluntary work or it could be a life of leisure.  I don’t intend to make that decision today as anything can happen between now and retirement.  At the time of writing this post my portfolio models show my early retirement window appearing in around 3.5 years when I will be in my early 40’s.