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U.S. Stocks Not In A Bubble; I'll Tell You What Is, Though
Charles, I'll have to await a reply here as to "what-is-though"; as I am not and won't be registered at "seekingalpha". So, no next page 2 for this house.
catch22, I used '10minutemail.com' to register on their site. Once registered at 'seekingalpha.com', you'll be able to access the complete article(s). Just follow the instructions at '10minutemail.com' regarding use of their site.
Hi Charles, the temp (throw-away) email service @ '10minute mail' allows me to keep my mailbox less cluttered from spam. I understand sites such as SeekingAlpha need to make money hence the many 'ads' generated and sent out.
I'd rather read the links provided here @ MFO since they've already been filtered by you savy folks than plow through the many 'ads' I'd end up getting from sites if I used my own email address.
I'll still generate revenue for SeekingAlpha (and MFO) when I visit their site through the links embedded here...just my 2 cents.
Uhhh ... the author's page one premise strikes me as arrantly silly:
In fact, the overall forward P/E for the 50 largest US large caps is less than 14. This compares to the forward P/E of the Nifty Fifty in 1972 which peaked at around 35. The top 50 US stocks by market cap also traded at a forward P/E of around 35 in 2000. Clearly, by any reasonable absolute or historical measure, there is currently no bubble in US large cap stocks.
Why would we use the two worst cases as our benchmark?
Page two:
1. profit margins don't revert, they just keep climbing higher. Everyone from GMO to Hussman are financially illiterate and incapable of reading the data. The argument for mean reversion is based "on flawed theoretical constructs that were first developed in the mid 20th century by an obscure Marxist economist from Poland." (Side note: no, it isn't. It's based on the obscure capitalist notion that if folks see you making huge gobs of money at something, they'll try to move in and steal your market and the resulting competition will drive prices down.)
2. we're fine right now.
US stocks are currently not in any sort of generalized bubble. There are some signs of "frothy" behavior in a few isolated segments of the market. However, the stock market as a whole is still within 1 standard deviation of its historical mean in terms of forward and trailing P/Es.
3. don't worry until you start hearing arguments about why high P/Es don't matter.
The author claims degrees from Stanford and Harvard Law (say "hi" to Cramer at the reunion!), occasionally goes by "Dr.", has been a senior official as "a major financial institution," was a senior trader at Banco Pactual, and run JK Advisory since about 2000.
Reply to @David_Snowball: Ha! Maybe I'm reading too much into it based on my own bias of market valuation. If so, my apologizes.
Lots of folks lately are calling the market topped-out and over-valued with major decline imminent. I'm cautiously optimistic that this bull has several more years to run.
Aside from some catastrophe, my biggest worry is probably how the fed unwinds its experiment. Otherwise, everyday and all around me, I see signs of growth.
Construction starts of new homes and businesses. Car sales. RV sales. IPOs increasing. Home prices rebounding. Unemployment dropping. Fed's commitment to (try and) keep rates low. Packed airline flights. New restaurants. Busy restaurants. Lots of travel. Credit availability.
All this is good for earnings. And buy-backs. And, continued rise in market. Ideally, an earnings-driven rise and not one caused by "irrational exuberance."
Reply to @Charles: I'm not particularly arguing that the market is egregiously overpriced, just that I'm unimpressed with "JK"s approach to argument and evidence.
Here, I hope, is Morningstar's total-market stock valuation graph:
Modestly overvalued after a long period punctuated by attractive valuations, at least by their calculation.
I am concerned with issues like the carry trade and blowback: the notion that the Fed is making it possible for institutional investors to borrow money interest-free which they then invest in risk assets. It's clear that lots of people are sensitive to the extent of that leverage which is why every time Bernanke said as much as "you know, someday we might ..." the market dropped 2%. Heck, he didn't even need to finish the sentence before the first 100 points of the drop occurred.
Comments
Thank you.
Catch
http://10minutemail.com/10MinuteMail/index.html
Why would you just not sign-up on the SeekingAlpha site proper?: http://seekingalpha.com/
I'd rather read the links provided here @ MFO since they've already been filtered by you savy folks than plow through the many 'ads' I'd end up getting from sites if I used my own email address.
I'll still generate revenue for SeekingAlpha (and MFO) when I visit their site through the links embedded here...just my 2 cents.
(I'm not signing in.)
Page two:
1. profit margins don't revert, they just keep climbing higher. Everyone from GMO to Hussman are financially illiterate and incapable of reading the data. The argument for mean reversion is based "on flawed theoretical constructs that were first developed in the mid 20th century by an obscure Marxist economist from Poland." (Side note: no, it isn't. It's based on the obscure capitalist notion that if folks see you making huge gobs of money at something, they'll try to move in and steal your market and the resulting competition will drive prices down.)
2. we're fine right now. 3. don't worry until you start hearing arguments about why high P/Es don't matter.
The author claims degrees from Stanford and Harvard Law (say "hi" to Cramer at the reunion!), occasionally goes by "Dr.", has been a senior official as "a major financial institution," was a senior trader at Banco Pactual, and run JK Advisory since about 2000.
Back to grading,
David
Lots of folks lately are calling the market topped-out and over-valued with major decline imminent. I'm cautiously optimistic that this bull has several more years to run.
Aside from some catastrophe, my biggest worry is probably how the fed unwinds its experiment. Otherwise, everyday and all around me, I see signs of growth.
Construction starts of new homes and businesses. Car sales. RV sales. IPOs increasing. Home prices rebounding. Unemployment dropping. Fed's commitment to (try and) keep rates low. Packed airline flights. New restaurants. Busy restaurants. Lots of travel. Credit availability.
All this is good for earnings. And buy-backs. And, continued rise in market. Ideally, an earnings-driven rise and not one caused by "irrational exuberance."
Here, I hope, is Morningstar's total-market stock valuation graph:
Modestly overvalued after a long period punctuated by attractive valuations, at least by their calculation.
I am concerned with issues like the carry trade and blowback: the notion that the Fed is making it possible for institutional investors to borrow money interest-free which they then invest in risk assets. It's clear that lots of people are sensitive to the extent of that leverage which is why every time Bernanke said as much as "you know, someday we might ..." the market dropped 2%. Heck, he didn't even need to finish the sentence before the first 100 points of the drop occurred.
David