“According to Lincoln Ellis of the Strategic Financial Group, the P/E game is a sham, starting with the notion that 14x is a genuine average.
“That multiple is really only indicative of the last 25 years” Ellis says in the attached video. “We are in a very difficult and different environment.”
Looking at the less bullish era from the 1950s to the early ’80s stocks traded around 10x, a valuation Ellis believes to be more applicable today. Calling low P/Es a “siren song” luring investors to their doom, Ellis advises investors to take a cue from the late Baron Biggs and do more legwork before diving in blind.”
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This guy says stocks will get cheaper soon:
http://economicprism.com/get-ready-for-a-massive-stock-market-selloff/
I hope it happens so we can scoop up some goodies at low prices and have those goodies become expensive in a few years. đ
But I’m not holding my breath. I seriously doubt that the US congressional idiots will allow the insignificant mandatory spending cuts to happen. They will probably pass a stimulus (or helicopter Ben will) and make stocks go higher along with the debt!
Second quarter earnings growth is down sharply from the 1st quarter and from last year, but Wall Street cut its earnings estimates so fast and so drastically that the headlines are once again along the lines of âThe trend of better-than-expected earnings continuesâ, even though most of those âexpectedâ earnings are dismal and down from a year ago, and some are actually losses.
Since June 1972 the nominal compound return of the SP500 was 1270%. Deflated for the CPI it was 149%. Deflated for the Shadow Government Statistics CPI it was minus 33%. Houses in the US have a compound return of 461% since 1972 but CPI deflated only 2% (and minus 72% using shadow CPI) Shillers statistics.
So even if we see stocks and houses go up in nominal value, even substantially, they may not be preserving our wealth.