So UBS broke down the world by sector and country, and started measuring/calculating. And then they put everything into big matrices such as this one:
(Courtesy of ZeroHedge.com)
I like buying relatively cheap markets and sectors, so I can’t be blamed for looking for patterns in the numbers. I didn’t get much that was interesting, except when I started looking at the aggregates. It seems that there aren’t that many sectors that are undervalued on a P/E basis, and only a few on a P/B basis. Looking further, not many countries are cheap on a P/E basis, while quite a few are cheap on a P/B basis. Hmmm. Which one is it?
Historically, P/E measures are not great at turning points. Often, during severe downturns the “E” can fall faster than “P” and P/E ratios can go up dramatically at market bottoms. So sometimes higher P/Es really are good to purchase. Then we come to P/B, which itself is one of my least favorite value metric since “book” is tough to standardize across industries (e.g. what to do about the goodwill?).
So where do this leave us? It leaves us where we are – churning. Some ups, some downs, but years of churn. That’s what bear markets do…they grind investors down until they’re fed up with exhaustion, frustration, and boredom.