Richard Russell is about a million years old and he says over and over again that great bull markets start when valuations reach extreme levels. That bit of knowledge along with your own research into historical valuations will make it crystal clear when great value is upon us in the stock market. We are still far from it...patience...it won't come in a day or a week or even a year, great value will build and build and build and from the period of overvaluation that we have seen for some three decades now it will take at least a decade of the stock market being undervalued before it is ready to take off in a new secular bull market.
--Fred
Thursday, February 17, 2011
Monday, February 7, 2011
Annualized Stock Market Returns Based on PE Ratios
An excellent post by Mish with some fantastic data on annualized stock market returns based on Price/Earnings ratios.
http://globaleconomicanalysis.blogspot.com/2011/02/negative-annualized-stock-market.html
What's really scary is that pe ratios have yet to drop below the historic average of 15 since 1987, at least not for an entire year. If I combine that bit of knowledge with the incredible debt of our nation and an ever worsening demographic I can only come to the conclusion that bad times are ahead and they will either be REAL bad or they will last for a long, long time. Likely it's a bit of both.
We have and continue to live beyond our means. I not only see this in the data but in the people that I speak to on a daily basis. I believe we have hard times ahead as a nation, but as Mish points out, when it happens is impossible to predict. I will continue to take stabs at shorting the market but mainly I think the prudent position is to save for the proverbial rainy day and be prepared to invest heavily on the long side in about 15 years. I base that time frame on demographics and my knowledge of Generational Dynamics and the Fourth Turning.
--Fred
http://globaleconomicanalysis.blogspot.com/2011/02/negative-annualized-stock-market.html
What's really scary is that pe ratios have yet to drop below the historic average of 15 since 1987, at least not for an entire year. If I combine that bit of knowledge with the incredible debt of our nation and an ever worsening demographic I can only come to the conclusion that bad times are ahead and they will either be REAL bad or they will last for a long, long time. Likely it's a bit of both.
We have and continue to live beyond our means. I not only see this in the data but in the people that I speak to on a daily basis. I believe we have hard times ahead as a nation, but as Mish points out, when it happens is impossible to predict. I will continue to take stabs at shorting the market but mainly I think the prudent position is to save for the proverbial rainy day and be prepared to invest heavily on the long side in about 15 years. I base that time frame on demographics and my knowledge of Generational Dynamics and the Fourth Turning.
--Fred
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