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David Snowball's February Commentary Is Now Available
Leuthold (usually bearish [edited], iirc) contrasts interestingly with this from Marvin Schwartz of NB; really makes you want to check his history:
\\ For 20 years, the average price/earnings ratio has been 19.3. If you go back 50 years, it’s 15.6 times. In periods where inflation grew 3% or less—which is 22 of the past 50 years—the P/E of the market was 19.7. Now, at 17 for 2019 and 15.9 for 2020, P/Es don’t look particularly stretched.
He's using average, which is inflated relative to Leuthold's calculation and including the frothiest part of the tech/telecom bubble (1997-20) in his calculation of what's normal. Using the average overweights the impact of the largest, priciest stocks relative to the majority of stocks in the index.
Here are Leuthold's 1957 to date historical median numbers on the S&P 500 for what interest they hold:
I think Grantham is using 1990 - present in his writing, as a nod to the argument that we're in the whole new era in which long-term data (back to 1927 or, in some cases, the late 1800s) is irrelevant.
Comments
\\ For 20 years, the average price/earnings ratio has been 19.3. If you go back 50 years, it’s 15.6 times. In periods where inflation grew 3% or less—which is 22 of the past 50 years—the P/E of the market was 19.7. Now, at 17 for 2019 and 15.9 for 2020, P/Es don’t look particularly stretched.
He's using average, which is inflated relative to Leuthold's calculation and including the frothiest part of the tech/telecom bubble (1997-20) in his calculation of what's normal. Using the average overweights the impact of the largest, priciest stocks relative to the majority of stocks in the index.
Here are Leuthold's 1957 to date historical median numbers on the S&P 500 for what interest they hold:
normalized p/e: 19 (now 25.3)
non-normalized, operating p/e: 16.8 (21 now)
ROE based p/e: 18.1 (25.4 now)
price/cash flow: 9.9 (14.3 now)
dividend yield: 2.9 (1.9 now)
price/book: 2.0 (2.0 now)
I think Grantham is using 1990 - present in his writing, as a nod to the argument that we're in the whole new era in which long-term data (back to 1927 or, in some cases, the late 1800s) is irrelevant.
As ever,
David
edited OP to say 'bearish', d'oh