Posts filed under “Valuation”

Shiller: U.S. Stocks Are ‘Highly Priced’

Shiller’s cyclically adjusted price-earnings ratio
click for ginormous chart
1015chart
Source: Bloomberg

 

 

Robert J. Shiller, a co-winner of this year’s Nobel Prize in Economic Sciences says US stocks are expensive. They are the most expensive relative to earnings they have been in more than five years — since the lows follwoing the great collapse of 2007-09.

Shiller’s CAPE ratio — the cyclically adjusted price-earnings ratio — compares the Standard & Poor’s 500 Index with companies’ average profits over the prior decade. The ratio ended last month at 23.7, the highest since January 2008, according to data available from his website.

Bloomberg notes that “the September ratio was lower than a peak of 27.5 in May 2007 — and even further below a record of 44.2, set in December 1999.”  Date for Shiller’s price-earnings figures go all the way back to 1881 (above chart 1900 – present).

Shiller made several other comments on equities:

“The stock market is rather highly priced. I worry that it might correct down.”

“I don’t think one should view it with alarm.”

“One could well — and probably should, in a diversified portfolio — invest in stocks.”

A far cry from his prior warnings of dot com stocks in 1999 and housing in 2006.

The CAPE ratio was developed by Shiller and Harvard University professor, John Y. Campbell.

 

 

Source:
Chart of the Day: Shiller Views U.S. Stocks as ‘Highly Priced’:
David Wilson
Bloomberg  2013-10-15

Category: Technical Analysis, Valuation

Whipsaw

Whipsaw David R. Kotok Cumberland Advisors, October 13, 2013     A whipsaw is a “long, narrowing, tapering ripsaw, usually set in a frame and worked by one or two persons.” Webster’s Unabridged Dictionary, second edition. What a play on words. “Long,” as in, we are now passing two weeks of shutdown. Different scenarios take…Read More

Category: Investing, Think Tank, Valuation

Shiller P/E Bottoms

Shiller P/E Bottoms Coincide with Major Lows, Downtrend Breaks Precede Rallies Click for ginormous chart Source: Merrill Lynch   Nice chart from Stephen Suttmeier & Co looking at how the Shiller P/E ratio compares to regular P/E at major lows, downtrend breaks, and before rallies: The good news is that secular trading ranges lead to…Read More

Category: Technical Analysis, Valuation

Beyond BRICs

Click to enlarge   Shorter Dave Wilson: Emerging markets have stunk the joint up. The longer version looks at some of the new ETFs that seek to shore up performance of emerging-market stocks by dropping the BRIC part of EM: -The four-country BRIC indicator has slipped 15 percent, with Brazilian stocks leading the decline. -Beyond…Read More

Category: Investing, Markets, Valuation

A Closer Look at Jeremy Grantham’s Expected Returns

Chart Attack,” FusionIQ’s Barry Ritholtz and Bloomberg’s Adam Johnson look at Jeremy Grantham’s 7-year expected returns. They speak on Bloomberg Television’s “Street Smart.”


Source: Bloomberg Aug. 21 2013

Category: Media, Valuation, Video

How Future Growth Impacts Current Equity Valuations

More fun with price-to-earnings ratios: Earlier this month, we looked at the question of whether Stocks were Cheap or Expensive. That was a follow up to our glance at how much Earnings and Equities had rallied off the 2009 lows. The problem is the many ways we can define earnings-per-share. Do we use analysts’ forward…Read More

Category: Earnings, Valuation

Stocks: Cheap or Expensive?

Click to enlarge Source: BofA Merrill Lynch US Equity & US Quant Strategy     Merrill Lynch’s quant team looked at 15 metrics* that measure equity valuation (above). Their conclusion? Stocks are not overvalued; indeed, by most metrics, they are fairly valued. Key bullet points: • S&P 500 has been playing catch up to other…Read More

Category: Investing, Valuation

Surprise! 2Q Sales Growth = +2.7%

click for larger graphic Source: Merrill Lynch Research     We interrupt the upcoming economic apocalypse and market collapse for this surprising message. Earnings are being revised higher, as are Revenues as well. Merrill Lynch, who tracks these sorts of things, notes that the latest revised expectations for Q2 are “1.3% higher than they were…Read More

Category: Earnings, Valuation

Readying for Financial Bubbles to Burst

Readying for Financial Bubbles to Burst By Andy Xie Caixin 07.29.2013     Small troubles regarding trust products and the property market will be worth enduring if major economic gains can be made Some financial accidents, e.g., trust products defaulting, may occur in the coming months. Their impact on the real economy will be limited….Read More

Category: Psychology, Think Tank, Valuation

Five Bubbles?

The stock market has been choppy since mid-June, thanks in part to tapering talk and even more data that proves China is slowing down. MarketWatch’s Laura Mandaro discusses five bubbles investors need to watch

Five Bubbles Investors Need to Watch

Category: Markets, Sentiment, Valuation, Video