Tag Archives: P/E

Hold on … Here Come Important Valuation and Corporate Earnings Charts –

As promised, it’s always good to step back occasionally and make darn sure we are not all being Lemurs (most known for following each other without thought) and gathering together, just before we go over the cliff….

Ok, so you are about to receive a blast of charts… we will code this post Forecast so we can go back and look at the “Forecasts” later….

Is the Market (S&P 500) Expensive?

This is the trailing PE (Price Earnings Ratio) the most macro valuation measure used from our Friends at Factset !

Green dotted line represents, 5 year average, and the dark dotted line represents the 10 year average….

Answer – Not cheap, but MAYBE not as frothy as it may feel at times (present party included) – certainly have been MUCH more expensive in the past…

Remember, tariff progress may release some pent up/held on the sidelines demand!

11-9-19 Trailing 5 and 10 year Avg PE Versus Current PE

What Areas are PROJECTED to Grow in 2020

This is what analysts are PROJECTING/Forecasting (hence our coding for future review) for the year 2020!

Recent Losers are expected to be next years winners- i.e. Energy and Materials….

What happens if Tariff Agreements are not reached? Not being negative here but we must consider this could be better or worse!

11-9-19 Earnings Growth for 2020 by Sector - Forecast

Earnings Versus Market Price Movement

You hear us say all the time, Earnings are the ultimate driver of prices… and they are….

No one says this is easy…. Earnings have been flat, but markets up….

Theoretically this should not happen … UNLESS market participants expect future earnings growth as markets are forward looking.

Q 4 2019 EPS Growth Change Versus market Growth

How about the Consumer?

Recall the consumer drives over two thirds of the economy through spending in our consumer consumption economy….

A Happy Consumer = Spending Consumer

One of the many Consumer Sentiment Indicators… University of Michigan…

Steady as she goes!

9-2019 U of Michigan Sentiment 10 years

Ok … you get the point, not too bad!

We could find something really hot and really cold, but these are the biggies from a high level!

Of course we did not forget the inverted yield curve and it’s recession predictiveness … we spoke about it here, here, here and here…. more to come…

Have a Great “Lemur Checkup” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

Q 4 2017 Newsletter Video Audio Podcast Review By John Kvale

Welcome to our Video and Audio Podcast Review of our Q 4 2017 Newsletter. For those on the road or just unable to grab the time to read, our podcast type review gives you the behind the scenes insight to our thoughts, observations and deep views of the entire Newsletter.

Click here for direct link to an electronic version (an early peek-good ole fashion paper versions are on their way to you shortly) and here for our Newsletter page

Let’s get going!

Q 4 2017 Newsletter

International Market Analysis

In a quest for value, it may be appearing overseas with our friends across the pond. Our core article of the newsletter discusses P/E Price Earnings along with the more smoothed CAPE or cyclically adjusted price earnings which is just a 10 year average ratio. With multiple looks at a long awaited possible long term positive trend, the next 3-5 years may be in the corner of  our overseas friends.

Tripit our App of the Quarter

After stumbling upon a neat app from a dear friend, “Tripit” makes our app of the quarter. Bet you have no idea just how many different reward programs you are involved … after loading them into our app of the quarter, your life will be easier.  Constant price reviews after the purchase along with multiple handy reminders may make this a fun – non financial review and item for you to try out this quarter.

Equifax Update and To Do’s

Our most popular posts on street-cents.com our blog, was the discussion of the Equifax breach. Our theme “Chillax” if our information had not been comprised before, it will eventually. The best defense in this case is an offensive preparation, BEFORE the next breach.

Break In: Yahoo announce after our discussion much more information had been compromised than originally thought …

Not IF, but WHEN our information is compromised …

1 Minute Video Reviews and Screen Shots

With tons of fun and compliments, our half dozen set of 1 minute video’s also make the Newsletter. If you like to talk like I do, full appreciation for just how hard it is to make a 1 Minute video… haha

Here is a link to our 1 Minute Video Page on our Website

Here is a link to all the Videos here on our blog

Parting Thoughts

Shhhh, we have a secret that we want to tell, but are forbidden for a couple of more weeks. We will only say it is an honor!

Watch for a reminder of our hopefully awesome Saturday Before Thanksgiving-Early November 18 Holiday Party at the Dallas Arboretum from 1-3 pm and free reign of the park until 5! Fun times !!!

Thanks for the time!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

Price is What We Pay, Value it What We Get

In a fun preview to our coming Newsletter, we wanted to run through a few charts and a reminder of a blunt valuation tool … So here we go!

The PE Ratio and CAPE (Cyclically Adjusted PE)

Directly from our Newsletter …

“One of the most basic valuation metrics used from a very macro level is the P/E ratio, or price to earnings ratio. This simply the price of an asset, group of assets, index or the like, divided by the earnings said asset is delivering. Most times the delivery is on a trailing annual basis, making for a nice round number.”

The CAPE ratio is just a fancy name for the 10 year average earnings, in order to smooth out the fluctuations of just one single year.

Current Valuations

Se we know our blunt valuation measure, let’s look at current levels … Higher would infer more expensive … Just FYI

S&P 500 (Favorite US Index) PE Ratio- 25 with a long term average of 14

S&p 500 P E ratio

S&P 500 CAPE Ratio – 31 with a long term average of 17

S&P Cape.png

The world is a smaller place now … Here is a world Capitalization from our friends at JPMorgan – Only 50% US?

JPMorgan MSCI global breakdown

CAPE Ratios for Big Internationals and Emerging Internationals – 15 and 13 BELOW long term average – Possibly Cheap!

9-1-17 EAFA and EEM CAPE

  • Overseas are more reasonable priced versus their long term average
  • Over half the world capital markets are overseas
  • After a long slow recovery, International counties seem to be getting on their feet

Glad we have holdings there!

Have a Great “Internationally Diversified” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

Earnings, a key driver to Capital Markets/Asset Appreciation … Friday

By a lot of metrics, capital markets may be frothy (our term), overvalued, or some even saying a “Bubble” (WAY over used in our opinion) ..
With a long term average of 15, a 24.6 Price to Earnings ratio (Prices divided by cumulative earnings of the capital market), the bluntest valuation instrument MAY be frothy.

BUT if earnings continue to grow, it would be logical for assets to at least maintain their levels and possibly even continue to appreciate, ESPECIALLY if the future looks bright!

Those steep declines represent a corresponding decline in asset prices… note this chart is going back to the 1800’s … we like long term views such as this…

Next week we will review the “here and now” of earnings and growth/sales  as we are in the middle of the 90 day treadmills we call earnings season….

Ahh… that is next week, today is Friday, enjoy your summer weekend !

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

Earnings, the key to Capital Market Growth … Let’s get an update?

The ultimate driver of Capital Markets are Earnings. Yes, we can argue about interest rates, currencies, world political and economic cycles, but all of these events are only important in how they change earnings or the growth there of “Earnings”.

Let’s take a look at early statistics from 2017!

Earnings Via our Friends at Factset

This from Factset, one of our favorite data aggregators in their regular weekly report.

  • Earnings Growth: For Q1 2017, the blended earnings growth rate for the S&P 500 is 13.6%. If 13.6% is the actual growth rate for the quarter, it will mark the highest (year-over-year) earnings growth for the index since Q3 2011 (16.7%).

Looking closely at the following chart, which is TRAILING earnings, forward looking capital market expectations can be seen. The trailing earnings are actually falling over the last few years, but the forward expectations as noted from the first bullet above are expected to climb more rapidly than the past six years.

5-12-17 Factset EPS change and Price


So just where are these revenues that are creating accelerating growth coming from?

5-12-17 Factset Geographic Rev chart

P/E or the Price to Earnings is the most blunt way to measure the valuation of capital markets. A high P/E might mean markets are overvalued and need to grow into their valuations, or a reversion to the mean reset to a lower level may be in the cards.

5-12-17 Factset 12 PE ratio V long term

From Factset’s estimates above, the current market P/E is about 22 with a normal of 16-17, undoubtedly higher than normal but certainly no guarantee of an imminent reversion down to lower levels.

If the growth estimates mentioned in the very first bullet come through in 2017, much of this froth may be taken out of the capital markets.

Either way, we have your back via our good friend diversification!

There you have it, a nice ‘Earnings Update” … We will be watching closely!

Have a great “Earnings Update” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

Earnings Update … Growing into our Big Puppy Feet Valuations

With tax season being so awful this year and our recent client event concerning Social Security and Medicare, we have spent very little time discussing the latest earnings season.

Earning Season Update

Earnings are the winds in the sails of capital markets, even at lofty valuations. While capital markets have moved very little this year (fine by us, see Sideways) ultimately earnings do, and will, drive price movement, even if it is to only allow growth into the lofty valuations created last year.

Here are a couple of data points from our friends at Factset as of week ended 5-2-14:

  • The blended earnings growth rate for Q1 2014 is 1.5%.
  • On March 31, the estimated earnings decline for Q1 2014 was -1.2%. Nine of the ten sectors have higher earnings growth rates today (compared to March 31) due to upside earnings…
  • For Q2 2014, 53 companies have issued negative EPS guidance and 19 companies have issued positive EPS guidance.

Interesting commentary again from Factset regarding the Dow:

…During this past week, the Dow Jones Industrial Average hit another all-time high value, closing at16580.84 on Wednesday. Given this record value, have companies in the DJIA been reporting strong earnings and revenue growth for the first quarter?

The answer is no. To date, 24 of the 30 companies in the DJIA have reported actual results. The blended earnings growth rate (combines actual results for companies that have reported and estimated results for companies yet to report) stands at -3.3%. If -3.3% is the final earning growth rate for the quarter, it will mark the third year-over-year decline in earnings in the past four quarters for the DJIA….

one our favorite charts we look at for longer term clarity:

The 10 year Shiller Cyclically adjusted PE ratio:


Cape PE 5-5-14

So what does it all mean ?

Earnings, the driver of higher valuations are growing. It appears the winter may have inhibited growth and we are accelerating as the summer months begin. BUT, we are at very high valuations currently. Just like a puppy with big feet, we can grow into these valuations, but there may be growing pains along the way.

For the record we become more positive as markets move sideways and earnings grow, its a better foundation to move forward on.

Have a Great Day!

John Kvale CFA, CFP

8222 Douglas Ave # 590
Dallas, TX 75225



September 2013 End of Quarter Capital Market Review (Video.. 2 minutes finally)

The FOMC provided fireworks in September, clearly the biggest event of the month which caught participants off guard. Before we jump to that we wanted to discuss the most common valuation method for capital assets, the P/E ratio, and it’s value as of today.

September Video Review

P/E Update Chart

This P/E Chart is from the S&P 500 and is based on Operating Earnings (takes one time items earnings numbers out.)  Our original thinking was to show you how we compare today to the past, and how frothy we are today…wrong… from this info. With a 24 year chart (thanks Donald) visually, we are not that overvalued. We would argue that this time period was unusual and we are still frothy compared to a more normal period of time.  Looking to the second chart, from Multpl.com which goes back to the 1800’s it gives a more normalized ratio. There is absolutely no possibility that the historical data is as accurate as our most recent. But it shows a more normal ratio over longer time periods.

Bottom Line: As you can see the market can get more expensive and continue to rise. If history repeats itself, the downside happens much faster then the up.

10-2-13 SP Op Earnings PE

10-2-13 PE Ratio Chart

FOMC U-Turns on Taper

We are still puzzled on the reasons, but no matter, Big Ben and the FOMC crew turned on a dime and decided not to reduce the QE stimulus (bond purchases to keep rates lower) even after repeatedly saying they were. When the book is written we will know what occurred, our suspicion is there is more than meets the eye.

Our problem is expectation and credibility. The capital markets were clearly ready for the much-needed reduced stimuli but U-turning, participants were caught off guard and had to quickly adjust portfolios, fabricating certain positive movements. The FED had almost guaranteed they would reduce the stimuli numerous times, leading most including ourselves to an expectation of much-needed reduction.

UPDATE: Government Shutdown…DID THEY KNOW??

9-27-13 FOMC SPY Punchbowl

 Larry Summers V Janet Yellen as FOMC President

Three days before the FOMC U-turn move on taper, word hit the street that Larry Summers had declined the job as president of the FOMC.  While no one knows how close he was to being  nominated, it is a well-known fact that Larry Summers supports our view of less taper sooner (hawkish.) Janet Yellen is thought to be more dovish (supports extended stimulus.)  During the Greenspan era it was hard to recall a dissenting vote. Bernanke has openly allowed dissenting votes. It could be possible the next chair may actually lose a majority vote at some point during his/her tenure….We are the only ones that we know of that would ever even say this at this time….time will tell !

Summers V Yellen

Financial Times Inheritance Article/Interview

A very proud moment in September was our neat article on inheritance planning. The article ran on a Financial Times Service and was also picked up by the Wall Street Journal. While this article is not directed at clients, more for advisors (making it even more flattering) we have dissect the details in an earlier post as we have enormous experience in the matter and this is a huge item to occur over the next several decades.

FT Article John Kvale

Don’t forget the spooky month we are in, however often times the fireworks begins in this quarter and push through the end of the year.

Have a Great Friday!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225