Stock Valuation: When will stocks be at great values?
Stock valuation, is important to your decision on whether to invest in stocks, and what stocks to invest in. Check the last post. It gives some numbers.
An argument can be made that the last time stocks in general were at "great" values was 1982. That's 27 years ago. That same argument claims that a great bull market started in 1982 and ended in November of 2007.
Doesn't this strike you as extreme? Maybe. But numbers don't lie. The last time the stock market had P/E ratios of 10 or lower, and dividends of 6 or higher, was 1982.
So if it's true that the previous bull market lasted for 27 years, the longest and most powerful ever, then the bear may be long and nasty - the flip side of the coin. (There's another theory to that effect.)
Hey, let's create our own theory! We'll call it the "out of whack" theory.
How could things have gotten so out of whack for so long? How could a bull market travel so high for so long? Why didn't it correct at some point earlier? But the "out of whack" theory doesn't stop there. Like any good theory we can use it to interpret lots of things out there. Like people's weight, for instance.
We all know that people are fatter than ever. The media constantly runs stories on the "obesity" problem out there. But no one's really talking about this interesting tidbit (courtesy of the great Richard Russell): It used to be that the rich were the fat ones. The poor were skinny.
Think about that. Doesn't it make sense? In a world that wasn't "out of whack", people with lots of money would be in a position to indulge themselves. The poor would be skinny. But now, the rich take every precaution to look thin, whether it's diet, exercise, personal trainers, drugs, surgery - whatever it takes.
And the poor? Theoretically, if your poor, you really can't indulge yourself, right. You don't have the extra money to get fat. But that's not the way it is anymore.
It supports our "out of whack" theory, doesn't it? We could add a lot more "out-of-whack-facts" but we started this post talking about stock valuation - and how "out of whack" stock valuations have been for lo these 27 years.
So where does that leave the stock market now? If valuations still aren't at good levels (see our last post), we must still be out of whack. Maybe we should keep our eyes open to see if people start slimming down. Maybe that'll be a good sign that things aren't so out of whack anymore.
Ah, I guess the "out of whack" theory is going to wind up being just as confusing and distracting as most of what you read and hear in the financial media. How 'bout we just stick with checking stock valuations?
An argument can be made that the last time stocks in general were at "great" values was 1982. That's 27 years ago. That same argument claims that a great bull market started in 1982 and ended in November of 2007.
Doesn't this strike you as extreme? Maybe. But numbers don't lie. The last time the stock market had P/E ratios of 10 or lower, and dividends of 6 or higher, was 1982.
So if it's true that the previous bull market lasted for 27 years, the longest and most powerful ever, then the bear may be long and nasty - the flip side of the coin. (There's another theory to that effect.)
Hey, let's create our own theory! We'll call it the "out of whack" theory.
How could things have gotten so out of whack for so long? How could a bull market travel so high for so long? Why didn't it correct at some point earlier? But the "out of whack" theory doesn't stop there. Like any good theory we can use it to interpret lots of things out there. Like people's weight, for instance.
We all know that people are fatter than ever. The media constantly runs stories on the "obesity" problem out there. But no one's really talking about this interesting tidbit (courtesy of the great Richard Russell): It used to be that the rich were the fat ones. The poor were skinny.
Think about that. Doesn't it make sense? In a world that wasn't "out of whack", people with lots of money would be in a position to indulge themselves. The poor would be skinny. But now, the rich take every precaution to look thin, whether it's diet, exercise, personal trainers, drugs, surgery - whatever it takes.
And the poor? Theoretically, if your poor, you really can't indulge yourself, right. You don't have the extra money to get fat. But that's not the way it is anymore.
It supports our "out of whack" theory, doesn't it? We could add a lot more "out-of-whack-facts" but we started this post talking about stock valuation - and how "out of whack" stock valuations have been for lo these 27 years.
So where does that leave the stock market now? If valuations still aren't at good levels (see our last post), we must still be out of whack. Maybe we should keep our eyes open to see if people start slimming down. Maybe that'll be a good sign that things aren't so out of whack anymore.
Ah, I guess the "out of whack" theory is going to wind up being just as confusing and distracting as most of what you read and hear in the financial media. How 'bout we just stick with checking stock valuations?
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