Search Results for: return on equity

Earlier this year, the market was bombarded with a series of stupid charts comparing 2014 to 1929.  As happens with all incorrect predictions, the prediction that 2014 was going to unfold as a replay of 1929 has quietly faded, without a follow-up … Continue reading →

Suppose that you’re a middle-aged professional with a 30 year retirement time horizon. Your portfolio is 100% invested in U.S. equities–it consists of 100 shares of the S&P 500, worth $187K at current market prices.  Assuming that the fundamentals remain … Continue reading →

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 →

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 →

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 →

In this piece, I’m going to address three responses to my earlier piece on the Shiller CAPE. First, a response from Peter Atwater of Financial Insyghts.  Second, a response from John Rekenthaler of Morningstar.  Third, a response from Bill Hester … Continue reading →

For most of history, the Shiller Cyclically-Adjusted Price-Earnings ratio (CAPE) oscillated in a pseudo sine wave around a long-term (130 year) average of 15.30.  It spent 55% percent of the time above the average, and 45% of the time below–a reasonable … Continue reading →

NYSE Margin Debt just reached another record high, and an increasing number of market skeptics are expressing concerns.  They reason as follows.  A willingness to buy stocks on margin suggests confidence and optimism.  But markets don’t perform well when investors are already … Continue reading →

Earningless bull markets are bull markets in which stock prices rise substantially despite falling earnings.  Consider two examples from U.S. market history (price and EPS are for the S&P 500): Both of these earningless bull markets started from low valuations. … Continue reading →

This piece looks at issues related to the “Great Rotation”, the view that U.S. investors are in the early stages of a reallocation of their wealth out of bonds and into stocks.  The interesting charts are at the end, so … Continue reading →