Message from the spurious statistics department: Median Long Term PE is 15

Assuming my median 10 year PE statistic tells is useful (there are plenty of objections to it, the main thing in its favour being it's easy to calculate), the market's entering thrifty territory again.

The highest levels recorded at the end of 2007, as the bull market peaked and credit was soon to crunch, were about 20 times earnings. The lowest, in early 2009, were below 10. Crudely speaking then shares are safer below the mid-point of 15, and riskier above.

Right now, they're delicately poised at 15.

Look at the spreadsheet, you'll see I've also started measuring the earnings yield. Although one way to calculate the earnings yield is simply to divide the PE into one and multiply it by 100, I calculate it slightly differently, dividing Average Return on equity by Price to Book Value.

Taking the median, I've excluded companies with negative Returns on Equity and/or negative Book Values because they produce meaningless results. Technically I'm measuring the median Earnings Yield of the subset of profitable companies that are not in negative equity, the pool from which I select companies for investment.

The average earnings yield is nearly 9%, only 1% below my thrifty threshold. So in this bleak market, where pundits are unable to see through the gloom, there's joy for value investors.

Half the 495 companies that have produced positive returns over the last ten years and have positive equity are at or near thrifty territory.

Rejoice!