The chart above is as clear as night and day. Based on the adjusted P/E ratio, the stock market is more expensive today than it was at 1907, 1937, 1966 and 1987 tops. Just as expensive as it was at 1929 and 2007 tops. Only 2000 top stands above (due to the tech bubble and no earnings – it can be discounted away).
Now that I think about it, I am a little confused. I haven’t heard from a single value investor, or so called value investors, that the stock market is overvalued. David Stockman tends to agree.
David Stockman: ‘There Are No Markets, Just a Raging Casino’
“There are no markets left in any meaningful sense of the word, just a raging casino infected with the madness of the crowds and the central bank pied pipers who mesmerize them,” he writes on his blog.
Well said and I couldn’t agree more. Benjamin Graham must me spinning in his grave right about now. The only remaining question is, what is Warren Buffett and his disciples are up to? If they are to follow traditional Graham & Dodd valuation metrics, they should be completely out of the market by now. If not 100% short.
And while Warren Buffett’s corporate structure makes that impossible, the rest of the so called value investors should start asking this very same question.
