Please Answer This Question. I Can't.
Why are we paying twice as much for earnings now. What makes them twice as valuable? Could it be that we've fallen into the Argentina trap where we are biding up stock prices because we think the stock market is an inflation hedge? Is there an infinite source of greater fools?
I'd be interested to hear your thoughts. Thanks.
President of Target Date Solutions, home of Soteria personalized target date accounts, & Co-Host of Baby Boomer Investing Show. Board member of the Golden Life Community.
1 周Larry Siegel says Jeremy Siegel ("Stocks for the Long Run") blames it on a 1990s accounting change that understates reported earnings. The other Siegel -- Larry- responds with this: https://www.advisorperspectives.com/articles/2014/02/18/cape-crusaders-the-shiller-siegel-shootout-at-the-q-group-corral Now we've got a conversation!!
Creating Plans That Succeed For All
1 周Ron, We are paying twice what we paid 20 years ago because "WE KNOW" current prices are cheap compared to where they will be 20 years from now. Since the advent of cable business news in the early 1990s, the industry told the American public ad infinitum (perhaps ad nauseum) that the stock market is a perpetual money machine. When I started in this field in 2000, mutual fund company marketing pieces told us "There has NEVER been a period of X years where you lost money in the market." The value of X kept increasing through 3 50% declines in the market during the 2000s. The simple, and likely the least intellectually satisfying, answer to your question is optimism that things will be better in the future - despite paying multiples we thought would be ludicrous when I bought my first stock in 1976. Thank you once again for your contributions to reality. Doug Rongo
Retired from State Board of Administration Florida
1 周No longer in active investment management,so haven’t looked at data or factoring in a couple of years. As I recall there were some questions regarding the Shiller P/E index as a predictive measure. But curious if the surge in growth dominance for the S&P 500 skews the P/E, because of the market expectations for future growth stock earnings ?