You have my attention but I don't know what this means. Thanks in advance.

It is the stock price divided by the earnings per share of a company. Or in this case, a group of companies (those in the S&P 500).

Current PE ratios are high as compared to a long history, indicating that stocks MAY be over valued. Unless there is a rational reason for a higher than historical PE.

Price is the price of stocks. Earnings is the last reported earnings (last four quarters). Divide the Price by Earnings to get the Ratio.

When the ratio is high (say above 23) then stocks are deemed expensive. When it is low (say around 16), then stocks are deemed cheap. Of course people have many explanations why high in one situation or another is not high and vice versa.

I appreciate learning about the market from trusted DUers because I'm fairly clueless about it.

I have an observation, though. I'm curious to hear your thoughts. Since Trump's election and new policies, especially the tariffs and deportations, I've read economists say things are going to crash. The stock market is still up, though.

I begin to think that the stock market may not depend on the overall economic situation. There's money to be made when stocks are high and billionaires plan to keep it that way.

What are your thoughts?

Especially in these times, today, there is a ton of corruption in the stock market.

The SEC has no power to change this, nor the will to, especially under this administration. My belief is that the stock market is an entirely insignificant measure of the health of the economy.

Billionaire hedge fund managers control the market, and they manipulate it as they see fit.

Hedge funds make money whether the market goes up or down, and they can MAKE the market go either up or down. There is no true price discovery for the value of any stock in the market.

Billionaires make money whether the market rises or drops. Stocks are no longer dependent on company fundamentals. They are dependent on hedge fund whims. And they make their money by shorting stocks, betting on them to fall, while actually making them fall artificially, whether a company has good fundamentals or not.

It's the minute by minute movement of stock prices.

I've been doing it for years...I'm not a trader. I buy and hold, so I have a vested interest in doing this.

You can physically SEE the manipulation...I wish I could express this better than I am now.

But when you watch the movement of stock candles for years and years, you get a pretty good feel for what is going on.

A company reports very good news as far as earnings? The stock may drop like a rock anyway. That's the market maker, who by the way, is owned by a hedge fund, shorting the stock to drive the price down because the hedge fund is short the stock. That's the only reason...the movement of price can be totally detached from economic fundamentals.

It's infuriating to a small retail investor.

Stocks drop on good earnings if the "guidance" is negative or if it is less than expected or if a competitor is coming on strong or if a sector is deteriorating or if any one of many factors outside of a particular report apply. Debt load may have increased, sales might have been artificially goosed by one big customer, or regulatory changes may presage negative financial effects or there might have been a write-off or other depressing event in the previous quarter (so only by comparison) or a company officer may have been fired for good cause or personality clash or there was (rarely) manipulation.

I find it kind of ironic that a stock may have two or three analysts that estimate what quarterly earnings for the company will be.

Analysts, in my view, are just normal schmucks like me who maybe went to college and got a finance degree, who likely don't know their ass from a hole in the ground when it comes down to it. So they do a few spreadsheets, make a few assumptions, and come up with an earnings target, and then they publish it like it's the bible.

So a couple of "analysts" predict earnings will be $1.10 per share. Actual earnings come in at $1.08, so the hit piece articles come out about how the company missed earnings, giving the short sellers a perfect opportunity to short it some more, even with good future guidance from the company.

All based on the projections of a couple of loser analysts who probably have an agenda.

I want to get back into trading individual stocks after many years of absence. In doing so I will be keeping a sharp eye out for shorting opportunities (carefully). When stocks get irrationally exuberant, shorting provides a damping effect, which is a good thing.

I've vowed never to short a stock, even if I have a great desire to.

I'm not on margin, and I don't trust my own abilities when it comes to the potentially infinite risk of shorting.

Anything that has even a slight potential of losing 10,000 times more money than I actually invested because of some unexpected black swan event scares the shit out of me.

I thought the market / economy would have turned down (not crashed) by now, too. Timing the market (getting in or out or going short) is impossible with any precision. However, one can reduce risk. Even though the market is up, I'm glad I got out in January, glad purely for sleeping well at nights. It may even go up further, but I think the risk of downside is much greater.

Key factor in short: economic damage is being ameliorated and spread out over time so it is not dramatic, but I think it is accumulating.

tRumponomics is not the only factor, but even considering it alone, it seems the tariff tax effects are smeared out and not biting in one chomp. People and companies "front ran" most of the tariffs by buying and shipping ASAP. Some effects of tariffs were absorbed: consumers paying about 80% and companies about 20%. But front-run inventory is petering out. Christmas shelves are going to be a bit bare.

On the job front, the labour market was more resilient than we all expected. That is because hiring, firing, and quitting all dropped dramatically. Many employees are staying in place. Labour is in short supply but employers are not doing much hiring because of fear they may have to fire before long.

AI is having an effect on boosting productivity and the capital expenditures (capex) on data centres and military equipment (selling to Ukraine's allies) is booming. I think it will be or is being overdone and there will be a pullback. There are effective uses of AI at this level but not as great as corporations hope. The next wave of AI (maybe in five to fifteen years) will be much more mind-blowing than current AI.

Beware of cynicism. Many people are so cynical that they become blind to reality by falling into confirmation bias. They see one example of law-breaking and they rush to post "They are all bad". Yes, law-breaking and manipulation occur, but it is the exception, not the rule.

There is money to be made in any market, even by the retail (non-institutional) investor. So manipulation can occur high, low, or in between. Billionaires do not "plan to keep stocks high". They have employees who are adept at finding value when stocks are low and selling over-valued stocks. One of the signs of a teetering market is when insiders and powerful money are selling stocks while retail investors are buying. But billionaires have no special insight on timing markets beyond what can be found in books and commentary (most of both are garbage).

The thing about market timing is that if you can gain 70% of a market or stock swing up and avoid 70% of a market swing going down, you will outperform the market even though you miss the tops and bottoms by significant margins. You might get out 15% early (or late) or get back in 15% early or late.

PE Ratio kind of went out of whack in the 90s and there's a good argument to be made that historical context before then is now meaningless.

I know analysts who still base everything on the 100 year average PE ratio, they have been predicted doom almost non stop for 30 years.

To me, macro economic indicators are what I consider more now. The US economy is simply regular people having money and being willing to spend it, if that is the prevailing condition, corporations will do well. We're in for a bumpy ride due to tariffs and the layoffs they're causing, companies being overvalued in comparison to their earnings is a small factor, but not the main one IMO.

Then it was steamship companies.
Then it was railroads.
Then it was electrification.
Then it was radio.
Then it was electronics & defence.
Then it was computers.
Then it was the internet.
Now it is AI mania.

All of those had bubbles and over-valuation periods and crashes of varying degrees.

The standard PE ratio charts are volatile and hard to extract advantage from. The alarming thing about the Shiller PE ratio chart is that it seems more rational and correlated to key market events, especially the 1929-1932 crash and the dot-com bubble. It is now above the 1929 levels and almost breaking the 1999-2000 level. The latter is not some ancient history.