My morning reading:

• Shiller’s P/E: The CAPE of Less Hope (
• Odds on the trigger for next financial collapse (New York Post) see also Stocks as overvalued now as at 2007 high (MarketWatch)
• Consolidation or Exhaustion? (All Star Charts)
• BlackRock’s Three Reasons for an Equity Dividend Focus (The Reformed Broker)
NOW Gold can rally: Gold Bull Paulson Cuts SPDR Stake by Half in Bear Market (Bloomberg)
• The illusory housing recovery (Coppola Comment)
• The cruel trick played by history on Milton Friedman (Noahpinion)
• Smartphones Outsell Feature Phones (Digits)
• An end of books (Seth Godin)
• Jazz: Andy Bey Takes It Slow (WSJ)

What are you reading?


Chart o’ the Day: Euromentum
Source: The Reformed Broker

Category: Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

3 Responses to “10 Thursday AM Reads”

  1. willid3 says:

    are we getting value from investment advice from wall street?

    maybe not based on results. and since wall street doesnt want to have fiduciary responsibilities. but they do charge a lot for what you get.

  2. rd says:

    Re: the CAPE of less hope

    Everybody keeps quoting the valuation measures that Merrill Lynch references. However, the Merrill Lynch paper does not reference dividend yields or Tobins Q, both of which show similar over-valuation levels as CAPE.

    CAPE is largely independent of CFOs as it is really hard to successfully fudge earnings for 10 years. Many have tried, but they often end up leaving the S&P 500. Similarly, you need actual cash flow (also hard to fudge) to pay dividends for more than a year or two. Tobin’s Q is a bit more complex but is also somewhat separated in the long-term from the CFOs.

    However, as Shiller points out in the article, his models project 3% real returns over the next decade based on the current CAPE. That will not be achieved by cash or bonds unless ZIRP is dramatically reversed soon (unlikely) or bond yields suddenly rise 2% or more (which will cause an initial large capital loss). Jeremy Grantham’s numbers are similar. However, Shiller does not make any predictions about whether or not that 3% real return on stocks will be a nice straight rising line or an 1800s expedition across the Rocky Mountains.

    So Bernanke’s financial world is almost complete – he has basically forced people to buy stocks if they want to have a prayer of making money in real terms over the next 10 years. However, I think we need to strap on our seat-belts because those years are going to be rough going.