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bostonangler

Let this be your final warning on U.S. stocks’ overvaluation

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Watch out for your exposure to U.S. stocks.

That’s the message of history, even if it isn’t the message of Wall Street analysts and strategists.

As stock prices soar to new heights, the S&P 500 Index SPX, +0.18% has now reached levels of overvaluation only ever seen during the dot-com bubble and in 1929 — an eye-watering 31 on the measure known as the “Shiller PE” ratio.

But even if we fudge the numbers and exclude the depressed earnings from the global financial crisis a decade ago, we still get a reading of 25.5. That’s still way up there, and in almost 150 years, every time stocks have gotten anywhere close, they’ve come crashing down again.

Long-term view

The Shiller PE is named after Yale economics professor and Nobel laureate Robert Shiller, who tracks the data and popularized the concept. It compares stocks against the average earnings of the past 10 years, rather than just one year, as Wall Street likes to do. The argument is that longer-term measures smooth out the distortions of booms and busts.

 

Shiller has tracked his data back to 1881. The stock market’s average reading has been about 16 over that time. But that’s masked a wide range, from the single digits all the way up to 45 in early 2000.

Critics sometimes like to argue that the reading of late has been distorted because it includes the abysmal corporate earnings during the 2008-2009 crash. So I decided to exclude those, and just compare stock prices to the average of the past five years, rather than 10, to see how that affected the measure.

And, yes, it does. But it only cuts the reading from 31 to 25.5.

For reference, it’s only reached a level of about 25 on five previous occasions: 1901, 1928-9, 1966, 1996-2002 and 2003-2007. Each one ended with a crash.

“This time is different”

People on Wall Street always tell you “this time is different,” but it never has been yet. The “new era” of the 1920s, the “Nifty Fifty” stocks of the 1970s, the “new economy” of the 1990s. Investors in those eras have been told to ignore the lessons of the past and look only to the bright and unprecedented future.

Each time they’ve lost their shirts.

Other metrics with long-term records are also flashing yellow or red. Those include the so-called Tobin’s q, which compares stock valuations to how much it would cost to rebuild all those companies from scratch; and the Warren Buffett indicator, which compares the value of the stock market to the size of the national economy. (Buffett himself has somewhat backed away from that measure recently.)

But who knows? Maybe this time “really is” different. If it is, that itself would be different.

 

http://www.marketwatch.com/story/let-this-be-your-final-warning-on-us-stocks-overvaluation-2017-08-04

 

 

B/A

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Spoke with my stock man last week, was discussing whether or not given current market to pick some more aggressive stocks. Told absolutely not, now us not the tome, expectin a big market correction in September/October. 

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28 minutes ago, Sage449 said:

Spoke with my stock man last week, was discussing whether or not given current market to pick some more aggressive stocks. Told absolutely not, now us not the tome, expectin a big market correction in September/October. 

You should ask this person two questions. First, what is your political affiliation? Second, are you a Christian?

I present these questions for you with the most serious consideration. I can assure you that the stock market will not make a major correction for a downward turn in September. I will bet you $100 that will not happen. America is on the verge of seeing an explosion of wealth and explosion of technology and an explosion of sin. Take that as the prophecy it was when the Holy Spirit gave it to me.

I am not a stockbroker and I am not suggesting that you buy more stock. I am merely pointing out what will come to pass without a doubt. You make your own decisions.

I am also pointing out that we now live in a time where things have become much more black and white. Where  people stand politically and where they stand spiritually forms the entirety of their opinions.

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51 minutes ago, ladyGrace'sDaddy said:

You should ask this person two questions. First, what is your political affiliation? Second, are you a Christian?

I present these questions for you with the most serious consideration. I can assure you that the stock market will not make a major correction for a downward turn in September. I will bet you $100 that will not happen. America is on the verge of seeing an explosion of wealth and explosion of technology and an explosion of sin. Take that as the prophecy it was when the Holy Spirit gave it to me.

I am not a stockbroker and I am not suggesting that you buy more stock. I am merely pointing out what will come to pass without a doubt. You make your own decisions.

I am also pointing out that we now live in a time where things have become much more black and white. Where  people stand politically and where they stand spiritually forms the entirety of their opinions.

 

I disagree with your two questions. Really one should ask, if the advisor is selling products from their own company and what are the fees...

Politics or religion would and should not play any role with an honest financial advisor. Notice I said honest.

 

B/A

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2 hours ago, bostonangler said:

Politics or religion would and should not play any role with an honest financial advisor. Notice I said honest

Honesty is exactly what my two questions were designed to clarify. As anyone that is a democrat voter can not be a true follower of Jesus Christ. And before you bash that know that I make my statements based in the fact that democrats are pathologicaly dishonest and habitual liars. And so demonic controlled that they are incapable of even knowing the truth.

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7 minutes ago, ladyGrace'sDaddy said:

Honesty is exactly what my two questions were designed to clarify. As anyone that is a democrat voter can not be a true follower of Jesus Christ. And before you bash that know that I make my statements based in the fact that democrats are pathologicaly dishonest and habitual liars. And so demonic controlled that they are incapable of even knowing the truth.

 

Well I can tell you those who proclaim to be Christians, the ones who constantly tell me how Christian they are, the ones who "wear it on their sleeves" are the ones who rip me off the worse when I do business with them. So no offense, because I know that most Christians are honest, but in business when someone starts telling me how devoted they are, that has become a HUGE red flag, and I get payment in advance... If they or anyone I do business with does not have the deposit, I move on... I've been burned too many times by "good people"

 

When talking to financial planners, I don't care if they vote left or right, go to church or not, I'm interested in what they are trying to sell and how much it will cost. For example, if you talk to someone and all they have to offer is products offered by their company, run away as fast as you can. A good financial planner will offer products from many different companies. If not, they are setting you up for their big commissions.

 

B/A

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Lgd, I will listen to all but still make my own decisions. That way I've only myself to blame. B)

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3 minutes ago, Sage449 said:

Lgd, I will listen to all but still make my own decisions. That way I've only myself to blame. B)

You may never know how the Lord just used you. 

I think that you have made my point much better than I. 

 

As I once again back out of a mindless and unintelligible conversation, I will point out two things.

1. First and foremost, notice how the simpletons that berate President Trump all day long which are now attempting to tell us how to find a financial planner ARE NOT VIP. Nor are they remotely involved with Mr. Montana's post RV strategies.   

 

2. Nothing proves my point more. Adam loves the Lord, and is fully capable of thinking outside the box.

Anyone that is only looking to some,"financial planner", to ,"SELL", them some conventional service's is setting themselves up for one heck of a fall. Because one thing is most certain, everything is about to change. And the,"Norm", is about to become antiquated. 

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Hey BA, I know what you mean. I look at how a person treats other people (especially people who are less well off) and how they live their life. That is what speaks volumes to me. When I hear the "God Bless You" several times in a couple of minutes, or the pontificating of how religious they are, the hairs on the back of my neck go up. I have found these are the people you need to watch and who tend to be the biggest hypocrites,

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13 hours ago, md11fr8dawg said:

Hey BA, I know what you mean. I look at how a person treats other people (especially people who are less well off) and how they live their life. That is what speaks volumes to me. When I hear the "God Bless You" several times in a couple of minutes, or the pontificating of how religious they are, the hairs on the back of my neck go up. I have found these are the people you need to watch and who tend to be the biggest hypocrites,

I have found that to be so true myself. Though I suspect that you also mean your statement to be directed at me, I forgive you your ignorance in who I am. Most here know full well that I do the best I can to actually live my faith. And I simply can not stop talking about the Lord. Though I teach my wife and daughter that the BEST way to show your faith is to live it. That is the,"Shiny Beacon on the Hill".

And I would lovingly caution you not to use your stated feelings above as an excuse not to develop your own relationship with Jesus. We are not accountable for what," Hypocrites", do. We are only accountable for what we do. 

 

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LGD, too many today are unwilling to take responsibility for own actions.....in all areas of life.  One of the reasons were such a mess as a country. Besides needing Christ, the nation has become a never me mentality, never at fault and that needs to change too. 

 

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