^^^ do you financial wizards (cough cough) ever look at this statistic? The inflation-adjusted P/E ratio for the S&P 500, charted since 1890? Currently just shy of what it was on Black Tuesday just before the great depression. Looks to me (from the chart) like the market is now in a very similar position to that of the 1960s. i.e. Black Tuesday is to Dot-Com Bubble as today is to 1960s.
That aside, looks like the market is priced at a high multiple relative to the historical average.
Oh-Mys!
Looks like we are ABSOLUTELY DOOMED because the Shiller PE ratio said so!
Just another discredited analyst who is trying to make the case, that two random events, are somehow linked.
The serious answer is that I think those PE ratios are outdated now primarily because we have a shorter product cycle which is going to get even shorter as AI kicks in.
@Dougster, are you saying that, due to the fact that the product cycle is shortening, total returns of equities will be higher than what they have been historically, and therefore, investors are willing to (and going to) pay a higher p/e multiple in anticipation of these greater returns?
We are fucked
cheers
Look, I'm not in the field but it seems to me that Shiller's more of an academic economist than a stock analyst. He came up with simple metrics for the stock market based on inflation-adjusted earnings from the previous ten years. He came up with similar metrics for the housing market based on price-to-rent ratios. In both cases he published material explaining bubble formation -- well before the dot-com crash and well before the housing crash. Usually "discredited" academics don't get the Nobel Prize.
I did read some of his books a decade ago. He's an MIT grad with lots of math skills, but his books are incredibly simple, and he describes bubble formation based more on market psychology, with the influence of his wife who happens to be a psychologist.
I guess time will tell whether new technology and AI will make these PE ratios obsolete. However, that sort of rhetoric reminds me of the dot-com era. If you just inherited $3M from your uncle Fred, I sure wouldn't dump all your money in the market all at once.
I never look at it but I do realize a lot of money invested in the stock market is dumb money invested year round irregardless of prices and stock valuations that simply gets invested automatically in index funds.
I read today that either Tesla is going to cause major changes in ground transportation or it's stock is way over valued. They have yet to post a profit for a full year and the company is valued higher than GM. However trying to time something like when a stock will drop seems silly. I'm just not investing in it. I think when war breaks out with North Korea, a lot of people will be selling their stocks if they are able to and they aren't worried about just surviving a nuclear attack or looking for food and water if NK launches EMP attacks. US figures 90% of our population dead within 1 year if NK or anyone else gets 2 EMP bombs to go off along both coasts, Not good. If the power is out though, stock market might be closed for months. Unfortunately I think North Koreans have been programmed like little robots at an early age in their military to hate the US. Hopefully Trump made a deal with China to take the northern half of North Korea and to cut off the food supply if NK doesn't give up its nukes and long range missiles.
@trackstar: Exactly!
Lots of classic economic metrics, like GDP are outdated these days.
Have you tried asking your fave what she thinks of this