I know PE Ratios are old-school, investor 101, hardly an indicator of much of anything, right? Well, I couldn’t help but see that today the S&P 500 had a PE Ratio of 11.57…. below the PE Ratio it had back at the end of 1988. For reference, PE Ratio of the S&P got as high as 32 (or 46 by some measures) and change in 2001 near the height of that bubblicious time, and the generally accepted PE historical average is 15.

For long-term investment value, a PE this low represents a tasty bargain. Rather than trying to time the market bottom, if you are a long-term investor with 20+ year time horizon, the S&P index is looking pretty good!

FYI, MM rates on many banks seem to be heading down. NC SECU just changed their MM rate from 4.5% down to 4% even (on 9/20/2007), ING went from 4.5% down to 4.3% (sometime in Sept). Makes sense though, since the banks will need this extra capital as the foreclosures and credit crunch continues to play out and I’m sure the Fed’s dropping of the discount rate helped further justify this drop. I expect a further slide in the coming months ahead. On a positive note, MM funds like Vanguard’s VMMXX are still holding steady and unchanged, promising a returning 4.97% after expense ratio is accounted for…

I just came across this nice quote from Bill Miller, Chairman and CEO of Legg Mason Capital Management: “The NYSE financial index is probably the best barometer of what’s to come. The financials tend to be a very good indicator of where the market’s going. They tend to lead the market because they’re the lubrication for the economy. So I think the financial index will tell you if this thing is over, and so far it’s telling you it’s not over. It’s still falling. But just as financials lead on the downside, they will lead on the upside.”

Know of any other good indicators for when this correction might be near an end?

Wow. The VIX index has doubled in about a month. I’m thinking this is not a good indicator that the worst of this “market correction” is over.

Since gold and bonds are kind of flat during this correction (not that flat is bad – it beats 10-15% drops within 1 month), I’m wondering if a well balanced portfolio that can weather any storm would be best served with a sprinkle (maybe 2%) of VIX added to soften the blow.

With the current and ongoing national and international market volatility, a declining US dollar and rising uncertainty on many fronts, is now a great time to shift some additional resources into gold? Are other commodities even better suited?

This may be a dumb question, but any idea why the market is often surging in one direction or the other primarily starting at 3:30? It’s been more common than not lately, and is strong late market action in-and-of-itself an indicator of some sort?

The equity markets right now are extremely volatile. The VIX has more than doubled just in the past few months, and this presents some opportunity if you’re willing to buy during the dips. Before I go further, let me be clear that I’m only considering buying broad market indexes when buying dips – not individual stocks or niche ETFs or mutual funds. I feel buying into dips is only advisable when considering a broad basket of equities. So, to simplify the discussion below, assume that we’re talking about the S&P500 only (although this should apply to any index funds, ETFs and mutual funds that focus on a large basket of equities) and that we’re discussing using market dips to augment long-term holdings only.

The 3-part question I’ve been grappling with is: (1) what constitutes an actionable dip, (2) when to exploit this dip, and (3) how much to invest in the dip. Volatility helps create really nice dip opportunities, but it requires some speed, available funds, and some previously determined strategy to effectively capitalize on volatility. (more…)

I got interested in Oaktree Capital Management after reading a little blurb about them raising close to a billion on private markets. I like Oaktree’s focus on inefficient and alternative markets, and I looked into what it would take to get some exposure to their expertise. I went to their website to cruise around and check them out. (more…)

While many finance professionals that I respect (like John Bogle) claim Value funds outperform Growth funds, there are investment opportunities when one class of funds dramatically outperforms another. Currently, Value funds have been kicking the pants off Growth funds, but that might be helping set the stage for a contrarian trend that favors Growth in the next 1-3 years. (more…)

International stocks were one of the main investment options that many argued you need a top notch manager to effectively invest in. Au contrair! MarketWatch reported in September on a July Standard & Poor study comparing the 5 year returns on International Index managed funds and index funds and this report bears repeating here. Nearly 60-65% of Index Funds outpaced their Managed equivalents. Now the odds are better that you can find an actively managed international fund that outperforms the benchmark than you can find an actively managed US fund that does, but the odds are still not in your favor. An interesting Journal of Financial Planning article from 2002 had found that Small Cap and International Funds outperformed the benchmark index, but this is not reflected in the more recent S&P report.


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