Price Drops When P/E10=20
P/E10 has fallen below 22. Soon it will be 20. The Scenario Surfer tells us what to expect.
Previous Findings
When starting from a P/E10=26 (Bear Market), P/E10 always fell to 15. But it only fell to 10 about 50% of the time.
Data
I took these data using the Scenario Surfer with a P/E10=20 (Bear Market).
Run 1. P/E10=20 (Bear Market) at Year 0. P/E10=15 first in Year 1. P/E10=10 first in Year 3.
Run 2. P/E10=20 (Bear Market) at Year 0. P/E10=15 first in Year 3. P/E10=10 first in Year 7.
Run 3. P/E10=20 (Bear Market) at Year 0. P/E10=15 first in Year 5. P/E10=10 first in Year 6.
Run 4. P/E10=20 (Bear Market) at Year 0. P/E10=15 first in Year 7. P/E10=10 first in Year 27.
Run 5. P/E10=20 (Bear Market) at Year 0. P/E10=15 first in Year 1. P/E10=10 first in Year 4.
Run 6. P/E10=20 (Bear Market) at Year 0. P/E10=15 first in Year 3. P/E10=10 first in Year 5.
Run 7. P/E10=20 (Bear Market) at Year 0. P/E10=15 first in Year 6. P/E10=10 first in Year 12.
Run 8. P/E10=20 (Bear Market) at Year 0. P/E10=15 first in Year 3. P/E10=10 first in Year 4.
Run 9. P/E10=20 (Bear Market) at Year 0. P/E10=15 first in Year 5. P/E10=10 first in Year 10.
Run 10. P/E10=20 (Bear Market) at Year 0. P/E10=15 first in Year 8. P/E10=10 first in Year 11.
Data Summary
P/E10 fell to 15 by Year 5 in 7/10 times. P/E10 fell to 15 by Year 10 in 10/10 times.
P/E10 fell to 10 by Year 5 in 4/10 times. P/E10 fell to 10 by Year 10 in 7/10 times. P/E10 fell to 10 by Year 15 in 9/10 times. P/E10 fell to 10 by Year 20 in 9/10 times. P/E10 fell to 10 by Year 25 in 9/10 times. P/E10 fell to 10 by Year 30 in 10/10 times.
Conclusions
We can expect P/E10 to fall to 15 within a decade. We cannot be assured that P/E10 will fall below 10 that fast.
Those planning on a delayed purchase can look forward to buying stocks within the next 5 to 8 years. They should not insist that P/E10 fall all the way to 10 before buying.
Have fun.
John Walter Russell September 3, 2008
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