Can We Expect an Outlier Level of Returns for the next 12 years?

John Hussman of www.HussmanFunds.com does a great job taking data and showing us projected returns over time.  He now shows charts going back to 1926 (see below) showing the projected and actual 12 year returns of the stock market based on some slight variation of market cap to GDP ratio.  See the image below and also on his website (http://hussmanfunds.com/wmc/wmc160523.htm) Screen Shot 2016-05-23 at 2.39.42 PM                         As you can see, there is quite the correlation between projected returns (blue line) and actual returns (red line) going back 90 years.  These returns INCLUDE dividends and as you can see, right now, we are at less than 2% total returns over the next 12 years INCLUDING dividends.  Dividends are currently above 2% so that means that 12 years from now, the nominal level of the S&P 500 should be LOWER than it is today. Another chart he shows on his website is a scatter plot of all the results over the past 90 years to show their correlations.  See below.  Screen Shot 2016-05-23 at 1.52.00 PM                           As you can see, there is a pretty obvious negative correlation between Market Cap to GDP and the total subsequent 12 year returns. The interesting part, though, is what has been aggravating.  As much as I show people the first chart, everyone says "yeah but this time could be different." Yes, it could.  I do not deny that at all.  However, look at the outliers. There aren't any CRAZY outliers.  Are there fluctuations? Absolutely, but there are no 10% returns where there are a cluster of 0% returns and to the same token, when the actual returns were large (15% to 20%) you don't see a random occurrence of 0% returns.  It shows that these results are pretty much in tune with what is expected. I had an accountant in my office two weeks ago telling me that there has never been a 10 year period in which stocks didn't go up at least 10%.  First off, he is MASSIVELY off, but second, I asked him if he then thought that 10 years from now he thought that the S&P would be at 4500 and he said "No, probably 3500."  Which contradicted what he said about the 10 year returns never being below 10%, but also, this scatterplot shows that when the projection is as bad as it is now, we are NOT going to see a very large return compared to what was expected. I get it...it's data and everyone thinks all data can be manipulated to show you what you want to see.  I agree with that...to a certain level.  Definitely not here....
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Proof That Prices Won’t Go Up Forever

The great thing about bubbles or euphoric market price increases is that they feel invincible.  Yeah yeah yeah.  Ok. You don't feel that way now...or so you say.  The pundits all try to say that they don't feel that now which is why we aren't in any big danger.  But listen to what everyone says when times are good.  Their logic is that certain companies are changing the game so their prices will continue to go up. When it comes to real estate, "Look at how much this city is growing by! Real estate will continue to go up!" Ok.  So let's take a look at both of these kind of attitudes and why they are eventually proven wrong... Recently, start-up companies have been taken public at an alarming rate similar to the late 1990s with valuations that are obscene...are they as obscene as 1999?  I don't think so.  Back then, you literally could have a business plan and get a $1 Billion valuation.  Nowadays, you do need sales, but it's ok if you are losing more money than revenue you bring in (Yes...I said that right...like Uber) and you will still get multiple tens of billions in value...and then Square went public at a value 33% LOWER than it's last round of private financing.  Now, you are seeing more tightness in valuations of start-ups and less hype around them.  Look at stocks like Twitter and Square and other companies that have gone public in this new start-up world...they are at or below their IPO prices. EVENTUALLY "investors" stop caring about the things that drive prices up considerably . Always.  Look at every market mania in the last 100 years...there was always a capitulation point where all of a sudden, people cared about profit and valuation. We have seen it twice before in the last 15 years (stocks in 1999 and real estate in 2007) and we are starting to see it again now with stocks and real estate.  Does it mean that stocks will crumble and real estate will crumble?  Not necessarily but I wouldn't bet against that either. There was an article this week from Bloomberg (http://www.msn.com/en-us/money/realestate/san-francisco-tech-firms-see-workers-flee-dollar4500-rents/ar-BBrnfoV?ocid=spartanntp) that talked about how people are now moving AWAY from San Francisco because of the increased cost of living because of rent and home prices.  This is the first I have heard of this, but it is the start of something.  This is proof of how real estate can't just go up forever no matter how much demand you have (within reason).  At some point, it becomes too expensive to rent or buy and prices level off and/or start to fall until an equilibrium is hit...or sometimes worse. What I am saying is NOT new.  It is a reality of all market increases. At the end of the day, when you pay less for an asset today, you are giving yourself more return in the long run.  That's a fact.  The assets future price is NOT due to today's price...if it was, we would pay whatever it takes for EVERYTHING in the world...but as we have seen in history, eventually markets capitulate and prices drop when euphoria is at play.    ...
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Today Was Beautiful – AMZN and MSFT

So today was beautiful because it reaffirmed two of my calls.  Granted, one is still greatly in the negative, but it's starting to break. As anyone who reads this thing or talks to me for 5 seconds knows, I am very anti-Amazon stock.  I shorted it back in the high $200s and I have been beaten to a bloody pulp on it but the higher it went, the less sense it made.  It peaked at $696 (so far, it's a peak) on December 28, 2015 and it is now, after hours, as low as $542 per share.  Yes, they missed earnings, by a lot, but this company is headed for a major tailspin.  The valuations were crazy and it is finally starting to crack. This is just the start.  All the people who support Amazon only have one response: It's growth! Well, just like I always say, growth is great, but at what price?  You can't just pay whatever because it's growing fast! You still need to figure out what it's worth AFTER all the growth and work backwards from there, but the euphoria kicks in and people make it go up and up and up! Amazon will be below $200 a share in the near future.  That's my call.  And I will exit my short at $150 per share. And for the other extreme...Microsoft (MSFT).  Two years ago, everyone thought I was STUPID for buying this blue-chip tech company.  "It's dead!" everyone said. If it was dead, why was its revenue and profit both increasing year after year after year by 8-11% consistently?  It was almost like Bernie Madoff with how consistent it was with its profit.  Even I wondered if it was all a farce because how could a company that EVERYONE told me was dead still consistently increase profit and revenue?  One local tech "guru" even told me that he wouldn't buy Microsoft if it cost him $50Billion and it had $100Billion in a bank account and he could shut it down.  That's how stupid investors are on both extremes.  At that time, it was trading for $23 per share. I sold the shares this month for $55.  Hmmm.  Interesting. Bottom line is...I am not done with Amazon yet. And there will be a price that I am a buyer of Amazon.  Why?  Because investing isn't about the company, only. It's MOSTLY about the fundamentals from a long term perspective. Apple is one of the most fundamentally sound companies out there and a few years ago it went from $720 per share down to $350 or so when it couldn't make iPhones as fast as they were selling them.  Now it makes $50Billion in one year and it's down 5-8%.  How do you figure that? Yes, fundamentals don't matter in the short run, but they matter with a VENGEANCE in the long run.  This is probably the start of something for Amazon and the entire market when it comes to valuations. I've said this all before and I keep repeating it....
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The Constant Reminder Saves Us and Hurts Us

Everyone in the U.S. has seen this.  You are driving in your neighborhood and you see, in the distance, that mobile police trailer with a speed limit sign on it and an instant speed gun showing you your speed.  What do you do?  Like most people, no matter what speed you are going, you hit your brakes. Yes, the speed limit could be 25 and you are going 28, but you still hit the brakes.  Why? Probably the same reason why you want to buy more investments as your portfolio goes up and why you want to sell while your portfolio is going down.  As humans, we are trained to react to what we see in front of us.  That speed gun is showing you your speed RIGHT NOW and that you are, RIGHT NOW, going over the limit.  It doesn't matter how far over you are going, you still feel guilty being "caught" even though there is no cop around. It has proven to be highly effective and many cities that aren't just looking for revenue from tickets use it in order to make their neighborhoods safer. Think about it.  You react so quickly and you also react the same way with your investment portfolio because you get to see the market and your performance on a daily and hourly basis! When things are good, you just count your net worth increasing day in and day out and when times are bad, you just see all the money flowing out of your pocket for retirement and it scares you and you want to make a change immediately, no matter what fundamentals tell you. Isn't it odd, though, that the best investors of all time (Buffett, Graham, Dodd, Marks, etc...) always take a long term approach regardless of what that very second shows?  It's hard! But it's right.  When you invest for the long run, you will almost always see short term pain because the best investing takes sacrifice.  Whether it's buying stocks as they go lower and become a better buy, or buying real estate when things are bad and putting money into your property to make it more valuable, or investing in your business by spending more on advertising and sales today...it's almost always going to be bad in the short run. You have to ignore the fact that your very current situation of less money in your pocket today is the right one for the future. We don't have a daily reminder of what your business is worth or what your house or piece of real estate is worth, but you have the constant reminder of what is in your bank account.  You need to brainwash yourself to stop thinking short term.  You must.  Short term gains are usually at the cost of long term gains.  Stay focused.  Remove emotion and remember why you are doing what you are doing.  If, fundamentally, it is the right thing to do, then go forward with your plans and rest assured knowing that you have the right plan in place and now it is time to implement. Maybe that's why when I see those mobile radar guns, I never brake.  I've trained myself not to care about the short term...for the most part.  I'm still human....
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Recap of 2015

2015 is done and the market was flat, yet Barrons reported that they could not find a single financial advisor who said that they saw anything but a positive year for 2016.  Valuations remain at record highs, in some fashion, higher than 1999/2000 and yet I still read people saying that we are in the middle of a secular bull market.  Those who say that clearly have NO idea what they are talking about and what makes a secular bull or bear market.  They merely look at returns. We avoided the seventh year in a row of positive gains in the market, which had never happened in stock market history going back to 1871.  So the record of 6 still stands as matching the previous record. We saw a high of 2130 on the S&P and saw a 12% drop in August but, of course, in full cyclical bull fashion, investors gobbled up "value" shares and brought the market right back up to close to 2100 within a few months of August. Everyone still refuses to look at the highly correlated market cap to GDP ratio that shows that the next 10 years will have flat to slightly negative return, INCLUDING dividends, overall.  "This time is different" right?  Nope.  But it's amazing what you can convince yourself of when you need things to work out a certain way. The real estate market still proves to be hot.  Apartment buildings going for nosebleed prices, which can still work out for the long run if you put the right debt in place and reinvest profits into upgrading units to get higher rents.  I see people offering ridiculous prices for properties with very short due diligence and money going "hard" day 1.  It's almost as bad as 2006 but at least now you need some money to buy things. We are in interesting times.  Something will cause the fall to continue.  August was the start.  Yes, we are almost even from the highs, but it was the start.  The best stocks this year were also the most overvalued ones.  Shocking. Mark these words: Stocks and Real Estate Valuations will decrease GREATLY in the next few years (this year to 5 years from now) and all the gains you think you have will be lost.  This time is NOT different.  It's the same.  If your outlook is 40 years and you can weather big drops, you will be fine.  But if you can't, don't cry when it happens....
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Income Taxes: Personal and Corporate

Rarely do I try to get political.  This is not a post about politics, or at least it is not intended to be.  This is a topic about business, economics, and human reactions.  But of course, I will vent about a certain side of the aisle. Taxes are always a hotly debated issue.  They take money away from everyone and find its way into causes that you may or may not believe in, but we are told that the causes are for the better good of society.  I won't get into the inefficiency of government because that is not my intent here.  My intention is to discuss why I find it funny that people actually argue for MORE taxes on pretty much every level. When you have less money in your pocket, you will spend less. I don't care how rich or poor you are, this is a fact.  Everyone thinks that a billionaire doesn't care if they are taxed a bit more, and maybe they aren't! But anyone who thinks that a billionaire has paid taxes on their net worth is mistaken. Most billionaires have their net worth in businesses that they haven't been taxed on in full yet, so their smaller salaries are no big deal to pay a bit higher income tax on. Do I mind paying taxes?  Yes and no.  I own a house in Mexico and I love it down there.  The town is nice and my neighborhood is beautiful but I see how the town is and I always think "if there was just a bit more income or property tax, this place could look like any town in the U.S."  but of course it won't happen.  They don't do it down there...yet.  Is that why Mexico may be not as wealthy as the U.S.?  I doubt it.  The United States hasn't had large income taxes since day 1 of its existence and yet since the 1800s, it has been the leader of innovation and wealth in the world.  Yes, China and other developing countries are doing much better now, but they are growing much more because they have so much more to grow from! Their people make so little.  So when people say "Our taxes are so high but that's why we are so advanced!"  I just sit there and wonder how true that is.  The majority of our property taxes goes to schools and yet our school performance isn't at the top of the world while our property taxes are the higher in the world, I believe. So how does that figure?  Throwing more money at it won't make it better.  When your business is fundamentally failing, putting more money and doing the same thing doesn't make it work. Taxes take away from the middle class the most, which is what I always find funny. Even taxing the rich does that.  Most business people who have money want to make more.  They want to invest more. They want to buy more stuff for themselves, their families, and their business, which in turns gives more middle class people jobs making and servicing that stuff that is bought.  It's a great cycle. So when you keep taxing more and more, you take more and more out of the economy.  The Laffer Curve is great because it shows that at 0% in taxes you have $0 in tax revenue and at 100% in taxes, you would have $0 in tax revenue because there would be no incentive to work...so somewhere along the line, there is an efficient point where tax revenue is maximized at a certain tax rate.  Is that something we wall want to attain?  Sure.  No one wants to be taxed $1 more than they need to be, but the whole system of checks and balances is gone.  Reaching the efficient point of the Laffer Curve is never going to happen because tax rates are made by the people who get paid by tax revenue and who get things for their communities paid for by tax revenue. I wish everyone, rich and poor, would sit down and think about how their lives would be different with higher and lower taxes.  As someone I once knew who made $10 per hour once said to me "I've never worked for a poor person."  That was their way of saying "Yes, I know people wanna tax the rich more, but I work for a rich person and I want to make sure that his/her expenses are lower so they keep me around."  It was a very wise statement from a member of the very group that many on a certain side of the aisle would try to convince that they are being screwed by the rich person. I'm not asking for change dramatically from today. I am just asking people to think about the many domino effects that occur with higher taxes.  If the world is beating us at education and safety, as so many on the left try to tell us yet we have some of the highest taxes in the world, how can one make the argument that more taxes is the solution? Do I think the tax rate should be 0%?  That's a hard question to answer because I do like having police service and I like having roads and I would prefer the U.S. of today to the U.S. of 1850, relative to the entire world...but at some point, I need to say "This is just wasteful."  Let's stop making it class warfare battle and realize that when rich people do well, they want to do even better and that involves hiring more and creating more jobs and buying more stuff.  It may look cocky and arrogant, but it provides jobs, so maybe they shouldn't be slapped in the face for that....
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Psychology of Investing

There is no way I can possibly cover the full psychology of investing in one article.  In fact, it's impossible to even learn the full psychology of investing in one lifetime.  If anyone could understand it 100%, you would be able to time markets.  People don't realize it, a lot of times, but the emotions we have on a day to day basis transfer to every aspect of our lives. Think about times where you have been doing very well in work or with your personal relationships.  You, most assuredly, thought that the times would never stop.  You thought you could conquer anything.  And on the flip side, think about times when nothing was going right.  It probably felt that it would never end and you should rethink your career or your personal relationship that was having problems.  Are either one of these extremes accurate?  Of course not. Now look back at 145 years of investing history going back to 1871.  There are peaks and there are valleys.  Right before every peak, there is always a sense of "The good times won't stop!"  Only later do people say "Wow, how did we miss that?  It was so obvious it was going to end!"  Yet very few people are actually able to call it, and the long term accurate ones were probably too early to call the end of the good times.  And on the flip side, when things have been at the lowest of low points in history, it was hard to think that the market was ever going to turn around.  Think about it this way: From 1929 to 1932, the stock market lost 86% of its value.  Right before the collapse, there were many who said we had reached a permanent plateau that we would never go below.  And then the market plunged 86%.  How can one say such an extreme statement and then watch it literally go up in smoke in a matter of a few years?  Very easy...emotion. We are all humans. As disciplined an investor as I am, I still fall to emotion frequently.  However, I find that when I am being emotional, like the rest of humans, it is because of not understanding something.  Fear is basically a lack of understanding.  Right?  When you fear something, you don't understand it.  This is why an open heart surgeon can cut someone open and do amazing things inside the body, but if you brought a high school student to do the same job, they would probably faint from fear of screwing up.  Yes, that's an extreme, but I point that out to show that that is what is fundamentally the issue.  If you understand something, you won't fear the downsides and you can properly prepare for them. I used to fear bear markets.  Considerably.  I used to think the bear markets would never end.  Then I started to learn about what causes them.  Fundamentals are great to understand because it answers the "why" when it comes to market plunges and booms.  The one issue that fundamentals doesn't do is explain why markets decide to boom one day and plunge the next or vice versa.  But understanding that there are cycles and fundamentals drive those cycles has been very liberating.  This is why I can write on these articles for 3 years straight of saying the market is overpriced and not give in. Could I be wrong?  Sure.  But based on history and understanding history, I am confident things will come to a point where I will be able to buy good companies at much better prices than today.  How confident am I? Death and taxes confident. You have to understand these extremes in emotion and psychology to understand how to react when the best and worst times do occur.  You won't be able to time things, but you will be able to make better informed decisions that can save you or make you a lot of money in the long run.  If you ever find yourself worrying about something, go learn more about it.  Find out what causes the situation you are worried about and find out how it has affected people in the past. There is a reason why all the greatest investors of all time have talked about investing and finding investments that others have not discovered.  Psychology is the reason.  When everyone thinks an investment is good, the next step is that everyone will run out and buy that investment.  When they all go out and buy that investment, the demand is so high that it makes the price go higher and higher and at some point, it is overvalued.  The same is true for the flip side...when people think an investment is bad, everyone leaves it and sells, so the price is driven down.  But at some point, the price is SO LOW that it becomes a good investment again. Rarely is something worth literally $0. Learn as much as you can about the history of human emotion during peak times and valley times and, over the long run, you will be able to make considerable gains on the market and your counterparts.  Yes, you will have to take a bruising during the process because during peak times, you won't be buying as the market surges, and during bad times, you will be buying as the market drops, but over the long haul, you will have a great basis on your investments if you are broad based and stick to the long term fundamentals....
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Difference Between Pessimism and Realism

Because of my bearish views of the market, I am often hearing that I am looking for the negative of things.  This could not be further from the truth.  Not to brag or be arrogant, but the company I run, The Crossroads Group, owns 12 businesses as of Jan 1, 2016 (two are launching on that date) and all of which generate profits and positive cash flow.  Many are in their infancy phase (less than 1-2 years of age) and we have only had one business we have shut down.  How can someone be pessimistic and still start and operate 10 already successful businesses and two more starting in a couple of months?  Talk to any successful entrepreneur and they will tell you that optimism is one of the most important aspects of being successful in business. What I am is realistic.  I take an unbiased view of past historical results and look to make sure that I understand why certain things happen and relate them to today. That's it.  So when I wrote my long post last week about the State of the Market, it wasn't me saying "the world is going to end!" If anything, it was a positive thing to write! It said "hey, things are not good for investing right now but guess what, history shows there will be much better times to buy!" I always tell my friends who aren't sick of hearing me talk about the markets that there will be a time in the next 10 years where I will be one of the few people talking about how undervalued the market is! How everyone is missing out on buying at very low valuations.  Heck, there may even be a time where I am saying everyone should buy Amazon! The very company I have shorted.  Is it anytime soon? Probably not because history shows it can take time for valuations to come back to normal and go back to undervalued, but the patient investor will be fine waiting and making no returns in exchange for not putting capital in play at a time when history shows the future projected returns are dismal. I don't mind someone coming to me and saying "Paul, I see your points but here is where I have a question."  Last Wednesday night I posted my State of the Stock Market on Reddit.com and the comments were great.  People were just telling me how wrong I was without giving me proper data that is historically reliable to say I was wrong. This is a positive as well (uh oh! I am being positive!!! How can it be?!?!) I need more and more people to tell me how crazy and wrong I am....that will be a sign that things are topping.  As John Hussman always says, the topping of the market is not a single event...it's a process.  We lost 12% in August and quickly rebounded. This has happened, in some fashion, in every market topping in some way, shape, or form. So I will continue to give my realistic and grounded assessments of the market based on information from the past...reliable information.  Reliability of 92% seems pretty legit to me, wouldn't you agree?  It sure beats hoping that this time is different....
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Systems Will Sustain Your Business – Without You

One of the hardest parts of meeting with small business owners is their insistence on bragging that they are the lifeblood of their business.  I understand WHY they want to brag about that, but it's the last thing I want to hear.  There is too much risk when a business is reliant on one or a few key people to operate.  What happens if the unfortunate occurs and they are no longer able to work at the company?  Does the business shut down?  What will happen to my investment in their business?  I can't put my money at risk on ONE person. Putting systems in place to make your business successful without you around is very important to building a long term multi-generational business.  So many businesses fail long term because the proper processes are not put into place.  Granted, some businesses are just too small to have many people or processes in place, which I understand, but if you want your business to succeed long term, you need to be able to allow your employees to know what the protocol is for sales, management, finance, accounting...everything. This was a hard thing for me to do 10 years ago.  I thought it was important for me to be the most important person in the company.  Now I find myself getting annoyed when I am asking questions that I feel someone else should handle. It's not me trying to be a jerk, but it's me trying to enable my staff to do what they need to do to succeed even if I am working on a new business or other personal project.  You will also find that the more autonomy your staff has, the better they will perform.  They will feel more like they are owners in the business and are enhancing value. Don't go off the cliff, off the bat.  Start small by talking to specific key staff members and giving them some specific roles that you may have been in charge of before.  Tell them what goal and the past protocol has been and let them go and make mistakes.  As long as they aren't repeating the same mistakes over and over, you should feel good that progress, long term, is being made.  Enable your staff to do more while watching them from a higher and higher view point as the years go on....
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S&P Earnings Now vs 2007, Prior to Collapse of Stocks

I keep hearing that another 2000 or 2008 won't be happening.  Again, not being Debbie Downer or Negative Nelly, I am just trying to take in the actual data and see why it may different this time. Stocks are driven, over the long run, by earnings and sales, as they should be.  Earnings and sales will yield better cash flow and better balance sheets which, in turn, will lead to growth of stocks. In 2007, the market was experiencing a massive overvaluation and many just thought it was the banking industry that brought down the market, which it was not.  It was a factor, for sure, but the excess caused by banking is what caused stocks to reach such high levels. As you see below, in 2007/2008, the market was at very high valuation levels as measured by the stock market to GDP ratio, which is 92% reliable historically, according to John Hussman. Screen Shot 2015-11-15 at 12.56.52 PM As you can see, we are a bit more overvalued than they are today, but projected returns were still very dismal back then for the 10 year potential return, and guess what, the "improbable" happened.  It wasn't really improbable.  It is just like today.  Everyone thinks it can't happen because stocks were in the middle of a 4 year bull market in 2007. So what has caused the market to be 33% HIGHER than it was in 2007 and grow 200%+ since the bottom of 2009?  Let's look at earnings, sales, and U.S. GDP.  The point of this exercise is to show that in an overvalued market of 2007 that saw stocks drop almost 60%, we haven't made much more headway in terms of fundamentals. S&P 500 Earnings (numbers are inflation adjusted to today) In June of 2007, the S&P had hit its record earnings to date by earning $97 or so per share.  So what happened afterwards on S&P earnings from then until now?  After all the losses and the recession, earnings dropped all the way down to $8 per share, a drop of 90%+ by April 2009 and then started its climb back up, reaching a peak of $106 per share in September of 2014, over 1 year ago.  So at $97 per share and the S&P at 1520 +/-, the market was overpriced at near record levels and now we are 39% higher (2112 on the S&P) and earnings only increased 9% or so, how can we justify that from an earnings perspective? Not only that, in 2007, the S&P 500 companies had a total of $6.4 Trillian in debt and currently, S&P 500 companies have $7.3Trillion dollars of long term debt on their books.  Obviously, right now, they have more debt but the cost to borrow has plummeted! The 10 year treasury in 2007 was around 5% and now, the rate has been in the low 2% range, which is a drop of 60% in interest costs! Five percent on $6.4 Trillian vs 2% on $7.3 Trillion is a savings of almost $180 Billion! So our higher earnings now on the S&P 500 is skewed just from below normal interest costs. S&P 500 Sales (numbers are inflation adjusted to today) In 2007, S&P 500 had sales of $9.08Trillion amongst the 500 companies and this year, total sales are $10.9Trillion.  Definitely an increase but only an increase of 20%, which is nice but it's only an increase of 3% per year and doesn't justify a 33% increase in S&P 500 levels when coming from near historic high levels of valuation.  If this was 1982 and valuations were at historical lows, I would be fine with stocks going so high even though revenue growth hasn't matched it because there was such undervalued levels for such an extended period of time that a point of catch-up has to occur. GDP (numbers are inflation adjusted to today) As I always talk about, the stock market to GDP is considered to be the single most reliable snapshot of where the stock market stands at any given point in relation to valuations. In 2007, the U.S. had GDP of $15 Trillion dollars and 2014 had GDP of $16.3 Trillion, which is an increase of 8.7%.  Again, I won't even start talking about the amounts of government stimulus it took to cause that increase, but it's still not as high an increase as the price in the S&P 500.  Not even close.  And so we went from overpriced market to overpriced market.  We saw a 38% increase in S&P 500 value yet all the major factors that determine long term value are up minor amounts mostly driven by lower interest rates and government stimulus. Recap Screen Shot 2015-11-15 at 2.13.25 PM So even if the market was fairly valued in 2007, the current price would STILL be considered overpriced based on what has happened on earnings, sales, and GDP since then.  And we can all see from the graph above about market to GDP that 2007 was one of the highest points in history of valuation levels based on future 10 year returns. Hmph....
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