CFT_Banner

Jack Hough: Price to Normalized Earnings Not So Bueno

One of the key bullish arguments you’ll hear about stocks is that a PE of 14-15 isn’t so alarmingly high given where Fed Funds rates are and the earnings yield (inverse of PE ratio) versus the yield on a 10-year treasury. And this is true, expect margins are likely not sustainable at today’s levels over the course of a full cycle.

Paul Vigna had one of my fave investing columnists on his show today – Jack Hough looks at a more realistic multiple for stocks assuming profit margins mean revert lower at some point:

Source:

WSJ

Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

CFT_Banner