Bill, do you think Ken Fisher has a point?
Forbes: Portfolio Strategy
Four Dangerous Words
Kenneth L. Fisher, 08.12.02
forbes.com
...Note John Templeton's legendary phrase that the world's four most dangerous words are: "It's different this time." It never is. It just feels that way. At and around bottoms people clutch at ghoulish visions while praying to craven mythology that never was realistic.
This time, for example, many cite the market's high P/E, fretting further that it is higher now than in early 2000. All true--and normal. The market's P/E usually is higher at a bear market bottom than its prior peak because as a rule earnings disappear faster than stock prices.
Counterintuitive, but history shows there is simply nothing about P/E levels, cut any way you want, to help predict market tops or bottoms, or market levels several years out. That we believe otherwise is mythology...
P/Es often skyrocket around bottoms and thereafter because of all the writedowns. Correctly calculated, the market's highest P/Es ever were in 1920, 1932 and 1982, three of the five best times to buy in the last century.
But, it's different this time. ;-) |
