OT - I agree that there isn't a stock market "bubble". If you listen to the bears, they talk out of both sides of their mouth. On one hand, they say the market is wildly overvalued like never before. On other occasions they talk about the terrible advance/decline line and how most stocks have been in a bear market for two years. They note all the 52 week lows, etc. If all these stocks are going down, how can the market be a "bubble"? Whoever owns all these that are doing nothing certainly aren't feeling "the wealth effect".
It seems to me that the S&P has a high P/E because big growth stocks make up most of the weighting of the index and they are expensive. But, they are also growing earnings rapidly. There are other reasons why the S&P's P/E is high. They change the index all the time. It had some stodgy slow growers in the past. In addition, the '70s and '80s had much higher inflation than we have now, which leads to lower P/Es. And, if you listen to Greenspan, earnings are probably understated (opposite of what the press reports he says).
Anyway, even with all that, the thing is only up 7% for the year.
So, while there may be pockets of overvaluation, I doubt the entire market is wildly overvalued as they say.
Regards,
Ross |
