THE P/E COMPRESSION GAME

An Old Game With a Different Twist to Misprice RISK

Gordon T Long
11/15/2012

October 2012 Edition
1

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THE P/E COMPRESSION GAME
An Old Game with a Different Twist to Misprice RISK

NOVEMBER MONTHLY MARKET COMMENTARY
BIG PICTURE - KEEPING YOUR PERSPECTIVES............................................................................................ 4
HIGHLIGHTS - WHAT YOU NEED TO KNOW .................................................................................................. 6
SUMMARY ANALYSIS .............................................................................................................................................................................. 7
"QE∞ Unlimited": Fed Panics - "OMT" Unlimited: ECB Panics ............................................................................................................ 12
Defining Chart #1 - "Delusional Distortion" Expectations .............................................................................................................. 12
Defining Chart #2 - Long Term.......................................................................................................................................................... 13
Defining Chart #3 - Short Term ......................................................................................................................................................... 14
Defining Chart #4 - Short Term ......................................................................................................................................................... 16
THE PE COMPRESSION SHELL GAME ....................................................................................................... 20
HISTORICAL TRENDS & PATTERNS .................................................................................................................................................. 25
TRAILNG PE: Perspectives.............................................................................................................................................................. 27
SOME EXPANATIONS: PE Regimes .............................................................................................................................................. 28
CYCLICALLY ADJUSTED PE .......................................................................................................................................................... 35
TRAILNG PE : Shorter Term ............................................................................................................................................................. 36
UNDERSTANDING REGIME SHIFT ..................................................................................................................................................... 38
GLOBAL EARNINGS DON'T SUPPORT CURRENT MARKET LEVELS .................................................................................. 39
GOLDMAN'S GSAI ............................................................................................................................................................................. 40
THE FORWARD PE GAME .............................................................................................................................................................. 41
DON'T BE FOOLED ........................................................................................................................................................................... 43
WHAT DOES THIS TELL US .................................................................................................................................................................. 45
PE FOLLOWING 'HY" LOWER......................................................................................................................................................... 45
POST ELECTION TRENDS .............................................................................................................................................................. 46
CONCLUSION .......................................................................................................................................................................................... 47

PEs were tracking low credit Baa, then only B (non investment grade).

October 2012 Edition
2

Copyright 2012 © GordonTLong.com

Restricted
All Rights Reserved

general@GordonTLong.com

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