March was quite a rally and made my utterly battered portfolio looked, very battered.
From a historical view on past modern financial crises, one might argue we are close to getting out of a bottom. S&P's P/E ratio is now around 12, rallying from the lows of single digits early in March. Earning yield, which is the reverse of P/E, is about 8.33%.
One of Benjamin Graham's criteria is to invest in companies that has at least twice as large as the average yield on long-term AAA corporate bonds. The 20 yr AAA corporate bond yield, according to Yahoo! Finance, is about 6.5%. Only companies that has an earning yield higher than 13% or P/E lower than 7.7 would Mr. Graham find attractive.
I am an optimist and believe better future is ahead, but I don't believe we have truly experienced desperate market environment as most experts claimed. Maybe we will, maybe we won't, and no one will really know. In the meantime, I am going to continue to ignore what the general market is going to do and focus on smaller cap companies with disgusted share price but strong financial balance sheet and business prospect. And, at the same time, caution people who think the market will rebound in a swift moment.
Meanwhile, there is an interesting article offering the other side of the story about earnings on the overall US market.
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