Monthly Archives: March 2014

Profit Margins: The Death of a Chart

In the debate on profit margins, two different types of charts frequently appear.  The first chart is a chart of the aggregate profit margin of the S&P 500. Valuation bulls tend to prefer this chart because it undermines the view … Continue reading

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Wal-Mart’s 1974 Annual Report: Sometimes You Get What You Pay For

On Thursday, October 3, 1974, the S&P 500 closed at 62, the definitive closing low of the brutal 1973-1974 bear market.  The trailing twelve month PE ratio for the index at the time was 6.9.  The yield on the 10 … Continue reading

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Profit Margins: The Epicenter of the Valuation Debate

James Montier of GMO, whose work I deeply respect and enjoy reading, recently put out a white paper defending the Shiller CAPE from some of the attacks that have been waged against it.  He offered a number of strong arguments. … Continue reading

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The U.S. Stock Market is Expensive, and It Should Be

Is the U.S. stock market expensive?  To answer the question, we need to get precise about what we mean by “expensive.”  Expensive relative to what?  When valuation bears say that the stock market is expensive, they usually mean “expensive relative … Continue reading

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