Cheap? ...not so much

This table was in the most recent Barron's. It makes three points I have tried to get at for a while now. One, by being price to sales we can get around the whole argument surrounding price to earnings ratios (trailing vs fwd., operating vs. reported and GAAP). Price to Sales also highlights a major argument of mine in that the bulls are expecting a return to peak margins and earnings that were sustained (really created) in the bubble years. That is the only way they can say these PE's are cheap... and that just ain't gonna happen! Price to Sales shows what a silly argument that is.

This table also makes another point I feel is important in a hidden way. The March lows were most likely NOT the ultimate Bear market lows. Most major bear market lows do not sport these multiples 6 months in. Just like most major Bear market lows end in single digit multiples... and we did not get those in March either.

The table also (and obviously) shows how much risk is in the market at these levels.