Two things caught my eye over the past couple of days. Continue reading
Bloomberg’s Gadfly section has a good article on Jeremy Siegel and his views on market valuations.
Definitely worth a read, as it takes a look at the CAPE Ratio and the impact of GAAP reporting vs using operating earnings.
But what I found most surprising was the below chart. I don’t find the case for holding bonds today compelling, but I didn’t know they had until very recently been outperforming US stocks since 2000.
Obviously the start and end date of any indexed chart can profoundly change the “story”, but I found the chart interesting nonetheless.
There are some crazy valuations out there at the moment, and I’m an unashamed a member of the “this can’t last” crowd.
However, I also know the chances of me timing the correction and subsequent recovery are slim-to-none.
So I’ve been building a diversified portfolio, which will hopefully provide both exposure to future growth and some protection if the music stops.
Jeffrey Kleintop from Charles Schwab wrote some commentary a few weeks ago which I found comforting.
His key takeaways were: Continue reading
A good reminder by Donald Bennyhoff that 10% stock returns are average, not normal.
Returns are almost never average
Annual stock and bond returns, 1926–2016
As the new year approaches, the financial press will be full of stories such as:
- “Top 10 stock picks for 2017”
- “Investment experts say 2017 will…”
Which brings to mind the McKinsey article from 2010 “Equity analysts: Still too bullish”. In essence they found that equity analysts nearly always over-estimate earnings growth. However capital markets are more constrained in how they value companies. Actual P/E ratios are typically substantially lower than those implied by analysts forecasts. Continue reading