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0 pointsopportune3y ago0 comments

Earnings and P/E in isolation are not good indicators. They should be at least discounted against the “risk-free” rate of return, which if you haven’t noticed is high relative to the past two decades with further increases to come.

What a needlessly condescending reply

0 comments

atdrummond3y ago

I would imagine most HN posters have never done a DCF analysis in their lives but I know plenty of people who have which have never beat the market. Not sure I buy any model other than Graham-Dodd’s these days.

opportuneOP3y ago

Sure, that’s probably a better model. I don’t see anything wrong with it and it has more parameters.

I just think P/E by itself is way too oversimplified and a pretty garbage metric when used in aggregate + historically due to things like interest rates, sector/business model skew, relative maturity of companies, etc also fluctuating over time. It’s like Week1 of value investing 101, not an actual metric by which you’d want to engage in value investing or historical analysis.

ztrww3y ago

dot-com occurred in an environment where bond yields were considerably higher than they are now. Yet SP500 P/E wasn’t that much lower and had risen to higher levels than in 2021 despite yields being 3x higher.

RC_ITR3y ago

Ok what's your equity risk premium? How'd you calc it?

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