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The S&P 500 in 2020
Dr. Robert Shiller certainly knows which end of a PE multiple to hold up. He is one of the few economists out there who has produced the sort of long term historical and mathematical analysis of financial valuations that is rare on Wall Street.
Among his many claims to fame was his forecast of the coming residential real estate collapse in the mid 2,000’s, banging every pot and pan as loudly as he could to warn us all. His Case-Shiller index is the benchmark for tracking prices in regional real estate markets.
So I have to pay attention when the eminent Yale professor predicts that the S&P 500 will go no higher that 1430 by 2020, a mere 90 points higher than it is today. His data shows that from 1871 to 2008, the multiple has averaged 14, ranging from a high of 45 in 2000 to a low of 5 in 1921. By his calculation, the current multiple normalized over the past ten years is 23, making the market outrageously expensive.
That implies that we are only 17 months into a second lost decade for the stock market. With the country still digesting the housing bust, American standards of living falling, its currency chronically weak, relative global competitiveness shrinking, deficits ballooning, wealth excessively concentrating at the top, and the stimulus pump running dry, what else did you expect?
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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His data shows that from 1871 to 2008,
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only idiots use Shiller's PE index..
where fuck did he get earnings for companies back 100 years ago?
you cant find closing prices for most companies ..
there wasnt any qrt/year company reports in modern sense , excluding biggest ones..
again, bs as usual
alx
What Dr. Schiller does not seem to be including in his equations is a loss of purchasing power of the future dollar. I expect that the S&P will follow the Zimbabwe example, in that the market will rise proportional to the accelerating weakness of the fiat currency. The only way that he is correct is what, a sudden cliff dive of all currencies at rate that exceeds our own dive? The Krona and the Sw Franc will not cliff dive. The S&P will go to the moon.
I think that you think like I think but that you won't admit to thinking like you should think so that you keep your readers in suspended animation not knowing what to think, as they would like to think that thinking is a noble occupation but on reading what you think without your saying it they are inclined to think that thoughts are more a maze from another age, like that of Knossos. It continues to amaze them to the point where thinking itself becomes a plate of chinese noodles cooked by someone that cant tell when a high is a true market high and when a low is the lowest of lows that it will ever know. That is what good cooking is about. And whereas, some gurus are worth listening to others are more like reading a murder novel where even the last page is full of mystery, in order to sell its sequel...of hot air that rises all the way to 2020!
2020, eh? Might as well also predict who is President that year, which team wins the world series and what movie wins best picture. Sorry, but a LOT will happen between now and then. Inflation alone could blow the S&P 500 number out.
President-For-Life: David Petraeus
(Cabinet: all 4-star generals)
World Series: Cancelled. Players Union strikes for minimum salary of $1B/yr.
Best Picture: Ken Burns documentary: The 2018-2019 Reign of Terror -- Wall Street Guillotine Era
President: Paul Ryan
World Series: Yankees (only team with revenue to pay anybody anything)
Best Picture: General Urko and Snooki Make A Porno
You flip flop more than Cramer. Are you Cramer?
You flip flop more than Cramer. Are you Cramer?
MHFT "Yes...No...well Yes...Actually NO....depends...If you will listen to my BS."
Deep---Score !!!!