More PE10 Predictions

Here are more P/E10 predictions from my Type 2A Bull Bear Retirement Trainer.

I collected two sets of P/E10 data. Each set consists of eight runs. The first set assumes a Bear Market starting from today’s valuations, P/E10=27.3. The second set assumes a Bull-or-Neutral Market starting from P/E10=8.0.

Bear Market Predictions

Initial P/E10=27.3.

Run: Bear a1.
Low in Years 1-10: 15.2.
Low in Years 11-20: 8.8.
Low in Years 21-30: 10.9.
High in Years 1-10: 26.5.
High in Years 11-20: 21.0.
High in Years 21-30: 17.0.

Run: Bear a2.
Low in Years 1-10: 10.5.
Low in Years 11-20: 8.8.
Low in Years 21-30: 13.7.
High in Years 1-10: 17.0.
High in Years 11-20: 14.4.
High in Years 21-30: 23.2.

Run: Bear a3.
Low in Years 1-10: 9.7.
Low in Years 11-20: 8.6.
Low in Years 21-30: 12.2.
High in Years 1-10: 31.4.
High in Years 11-20: 13.3.
High in Years 21-30: 26.3.

Run: Bear a4.
Low in Years 1-10: 11.5.
Low in Years 11-20: 7.9.
Low in Years 21-30: 7.6.
High in Years 1-10: 21.6.
High in Years 11-20: 16.3.
High in Years 21-30: 14.4.

Run: Bear a5.
Low in Years 1-10: 11.0.
Low in Years 11-20: 7.0.
Low in Years 21-30: 13.8.
High in Years 1-10: 29.8.
High in Years 11-20: 26.4.
High in Years 21-30: 30.3.

Run: Bear a6.
Low in Years 1-10: 17.3.
Low in Years 11-20: 15.2.
Low in Years 21-30: 17.6.
High in Years 1-10: 27.7.
High in Years 11-20: 22.3.
High in Years 21-30: 45.4.

Run: Bear a7.
Low in Years 1-10: 17.0.
Low in Years 11-20: 12.7.
Low in Years 21-30: 13.2.
High in Years 1-10: 26.7.
High in Years 11-20: 27.5.
High in Years 21-30: 27.4.

Run: Bear a8.
Low in Years 1-10: 9.4.
Low in Years 11-20: 11.8.
Low in Years 21-30: 10.1.
High in Years 1-10: 26.2.
High in Years 11-20: 20.5.
High in Years 21-30: 23.1.

Bear Market Summary

In two sequences out of eight (starting from P/E10=27.3), P/E10 always stayed above 10.0. One had a low of 12.7. The other was very unusual. Its low was 15.2.

[Previously, starting from P/E10=26.0, P/E10 stayed above 10.0 in three out of twenty sequences. The previous lows were 11.4, 13.8 and 10.1.]

In one out of eight sequences, P/E10 failed to return above P/E10=20.0 during the years from 11 through 30. It only rose to 16.3.

Bull-or-Neutral Market Predictions

Initial P/E10=8.0.

Run: Neutral d1.
Low in Years 1-10: 6.8.
Low in Years 11-20: 10.9.
Low in Years 21-30: 14.5.
High in Years 1-10: 13.2.
High in Years 11-20: 14.1.
High in Years 21-30: 25.5.

Run: Neutral d2.
Low in Years 1-10: 9.4.
Low in Years 11-20: 14.9.
Low in Years 21-30: 19.0.
High in Years 1-10: 19.1.
High in Years 11-20: 22.7.
High in Years 21-30: 27.1.

Run: Neutral d3.
Low in Years 1-10: 8.4.
Low in Years 11-20: 10.5.
Low in Years 21-30: 10.2.
High in Years 1-10: 13.2.
High in Years 11-20: 16.1.
High in Years 21-30: 21.7.

Run: Neutral d4.
Low in Years 1-10: 8.3.
Low in Years 11-20: 11.6.
Low in Years 21-30: 11.9.
High in Years 1-10: 29.2.
High in Years 11-20: 26.1.
High in Years 21-30: 23.0.

Run: Neutral d5.
Low in Years 1-10: 8.3.
Low in Years 11-20: 11.2.
Low in Years 21-30: 13.8.
High in Years 1-10: 14.7.
High in Years 11-20: 21.8.
High in Years 21-30: 25.4.

Run: Neutral d6.
Low in Years 1-10: 7.6.
Low in Years 11-20: 11.6.
Low in Years 21-30: 11.1.
High in Years 1-10: 17.1.
High in Years 11-20: 19.9.
High in Years 21-30: 16.9.

Run: Neutral d7.
Low in Years 1-10: 10.4.
Low in Years 11-20: 16.4.
Low in Years 21-30: 13.1.
High in Years 1-10: 17.2.
High in Years 11-20: 24.9.
High in Years 21-30: 32.5.

Run: Neutral d8.
Low in Years 1-10: 7.6.
Low in Years 11-20: 12.1.
Low in Years 21-30: 14.3.
High in Years 1-10: 12.2.
High in Years 11-20: 17.2.
High in Years 21-30: 25.2.

Bull-or-Neutral Market Summary

In seven sequences out of eight (starting from P/E10=8.0), P/E10 climbed above 20.0 during years 11 through 30. The other sequence grew to P/E10=19.9.

The highs between years 11 and 30 were 25.5, 27.1, 21.7, 26.1, 25.4, 19.9, 32.5 and 25.2.

All eight sequences had P/E10 levels that remained above 10.0 in years 11 through 30.

Conclusions

These sequences are satisfactory. They are realistic enough for training purposes. They are relevant to today’s investor.

These results support the notion that all of Professor Robert Shiller’s P/E10 data are reasonable. His entire P/E10 plot has helpful information, even today.

Have fun.

John Walter Russell
September 15, 2006