Is the market cheap? Expensive? What does it mean and does it matter?
Dr. Ed Yardeni who has been very bullish on earnings now believes that even if we don't have a recession earnings will slow dramatically next year and fourth quarter earnings are likely to have more negative guidance and downside surprises. We think he may be a tad optimistic from looking at the information he...
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What ultimately determines stock returns? Is it earnings? No. It is dividends, even for companies that presently pay none. Today we discuss why dividends are the key to long term returns, even when we discuss growth stocks that pay little or no dividend.
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John Hussman has warned for a few weeks now (as he did in late 2007) that we are now observing a set of conditions that every recession has exhibited, as well as conditions that when they have appeared have always been during or immediately prior to a recession (though the confirmation that it...
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There are a few people who I consider must reading in investing. Jeremy Grantham and James Montier are two of them, and now that Jeremy has hired James they are both at the same firm...
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Now that the "relief rally" we expected has arrived, we encourage investors to think carefully about how to use this respite.
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Most of us can relate to driving and having children ask "Are we there yet?" JJ Abodeeley tries to answer that question. Like us, JJ sees what we have been going through since 2000 as a long process of the market working itself from an expensive peak to a cheap bottom. JJ calls...
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JJ Abodeeley hits a pet peeve of ours here at Risk and Return, the misuse of forward operating estimates to claim that markets are cheap. Of course, we have spent ten years listening to people claim stocks were cheap no matter the environment.
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For the second straight year we have seen the old saw about selling in May work out. Selling July 22nd would have been wonderful as the market has been down almost every day since. Good things come from every crisis however and we welcome investors...
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Mark Hulbert addresses a topic that is quite timely. When different advisers or commenters arrive at different conclusions, especially when they seem to be using the same type of reasoning, how do we know what to think? Frankly, most of the time we humans tend to choose the conclusion which we want the data...
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Stocks Cheapest in 26 Years as S&P 500 Falls, Earnings Rise 18% There is so much wrong with that statement, so many misleading claims. Feel free to point out the issues in the comments if you see any I don’t mention. Read the article here. My short list: 1. Operating earnings are compared to...
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Butler|Philbrick & Associates have published the full report we discussed here. One aspect of the report we touched on earlier was that it combines a number of different methods to test their effectiveness as well as show the returns each projects. In our own research we use components of returns analysis such GMO and...
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I know we keep hearing from many quarters that stocks are cheap. We disagree vehemently and today we bring you an expert witness. Having called the last few bubbles economist Robert Shiller discusses why he believes stocks are at least 40% overvalued and Real Estate could fall in real terms (meaning adjusted for inflation) another 25%. Click read more to see second video. Hat tip: Prag Cap
One of the positives that we have seen since 2008 is that more and more advisors are looking at ways of legitimately projecting future returns rather than just plugging in what has happened in the past with some minor adjustments. Long time readers know that we feel that future returns can be projected within...
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Ben Inker on why Quality is the way to go. While there are always exceptions, at the asset class and sub assset class level we could not agree more.
Vincent argues that the flawed foundation of Modern Portfolio Theory (MPT) that risk=volatility has allowed MPT advocates to control the language of the debate and set the stage for the obvious conclusion that passive index-based investing is inherently superior. And don’t think for a second that this debate is simply theoretical, academic, or unimportant–...
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Over at dshort.com there is an interesting look at valuation and regression to the mean (click image to link to larger version) The peak in 2000 marked an unprecedented 160% overshooting of the trend, which is double the overshoot in 1929. The index has been above the trend for 17 years. We also see...
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As far as I know Jeremy Grantham has never appeared for the general public on TV or video. We get a real treat from Consuelo Mack of Wealthtrack with Jeremy dispensing advice about where the market is now. Like myself he sees the market as reasonably cheap, but not spectacularly so. He gives sound...
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Yes, but they are supposed to be if you want reasonable returns for the risk, which is one more reason the Fed Model is wrong. Compared to the past however not that cheap. Jim Hamilton takes a look: We’re currently at a P/E around 14, a bit below the historical long-run average P/E of...
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From the New York Times: Earlier this year, Mr. Bush derided a modest plan to provide $4 billion to states and localities to buy foreclosed properties, saying that buying up empty homes helps only “the lenders or the speculators.” Actually, it protects entire neighborhoods and local economies from the effects of foreclosures by preventing...
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Mark Hulbert reports on two indicators that historically have pointed towards above average returns for stocks: The indicator in question focuses on corporate money-raising. Considerable research has shown that when companies turn aggressively to the equity market for their financing needs, through new issues or secondary offerings, it is a sign that the stock...
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