For what's it worth the PE (trailing) of the ASX All Ords has reached 18 which is highest it's been since 2002. My chart below based on Colin Nicholson's numbers
The world sure is a happy place at the moment
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
For what's it worth the PE (trailing) of the ASX All Ords has reached 18 which is highest it's been since 2002. My chart below based on Colin Nicholson's numbers
His how to pay sector rotation is also a good one. Investors and traders should rotate some sectors and stocks now. I would like to add one more. I will add market rotation for 2017 as well.
Originally Posted by Hoop
Jeff Miller's articles are always a great read...well balanced and lots of info and links...He often gets the Editor pick (Seeking Alpha).
Robert Shiller: I define a bubble as a social epidemic that involves extravagant expectations for the future. Today, there iscertainly a social and psychological phenomenon of people observing past price increases and thinking that they might keep going. So there is a bubble element to what we see. But I'm not sure that the current situation is a classic bubble because I'm not certain that most people have extravagant expectations. In fact, the current environment may be driven more by fear than by a sense of a new era. I detect a tinge of anxiety and insecurity now that is a factor in markets, which is quite different from other market booms historically."
Robert Shiller: I define a bubble as a social epidemic that involves extravagant expectations for the future. Today, there iscertainly a social and psychological phenomenon of people observing past price increases and thinking that they might keep going. So there is a bubble element to what we see. But I'm not sure that the current situation is a classic bubble because I'm not certain that most people have extravagant expectations. In fact, the current environment may be driven more by fear than by a sense of a new era. I detect a tinge of anxiety and insecurity now that is a factor in markets, which is quite different from other market booms historically."
Wonder what he's thinking now!
Exuberances defining a market top is a DOW Theory thing.
The most strange event upon us is that even after 8 years of the Bull rally there is still this continuous sentiment of market uncertainty with investors, yet when it comes to their trading, their behaviour, as seen by the elevated multiple earnings (PE) would seemingly suggest otherwise..Pioutos's article (see below) suggests the long lead up with this very long Bull market could be due to the lagging memories from the Great Recession creating an undervalued market in early stages of the Bull Market cycle..quote "...There is a case to be made that in the recent era of ultra-low interest rates, the market simply mis-estimated the correct earnings multiple. It should have been higher over the past several years...." Pioutos implies that the Market operates on above average PE's during a low interest rate era.
Pioutos article highlights the correlation of the Market with Treasury 10 year yield rates....
"...For purposes of this article, I am using the S&P 500 index price divided by trailing 12-month earnings per share before extraordinary items. The graph below plots these average monthly P/E ratios versus the average monthly 10-year Treasury yield over the last 50 years. This dataset gives us 600 data points to estimate the relationship between equity multiples and interest rates.
At Friday's close, we sat at a P/E ratio of 21.96x and a 10-year Treasury yield of 2.478%. From the graph above, one can see that we are currently sitting just above the historical trend line. For those scoring at home, the slope of that dotted line is y=-0.9302x + 22.715. The current level of the 10-year Treasury yield would equate to an S&P 500 index level of 20.41x using the historical relationship, which would suggest that the S&P 500 is currently about 7% overvalued......"
Observing the chart you can see the case in point with that market mistiming back in 2010...The market rally should have been steeper up slope trend...therefore the opinion suggests 2 to 3 years into the Bull Market cycle the market was clearly undervalued..When the market started to correct with a steeper climb and the earnings remaining lack lustre it felt like the market was getting ahead of itself manipulated by the FED when in fact the market had just woken up and was in an rational state of correcting back from under values to "normal" values..
Back to your post Huxley...
Wonder what he's thinking now! (Shiller) .....Probably the same (due to sentiment) but at a heightened level (and risk)..His PE Ratio is now 29.36 (as of 3/3/2017) it was ~25 when he wrote that piece you quoted..so the market was and still is overvalued (See my earlier posts)...
Pioutos's article is very good and explains sharemarket physics in an easy to read and understand format..the whole article is here
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Originally Posted by winner69
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