ES -- DX/CL -- isee -- cboe put/call -- specialist/public short ratio -- trinq -- trin -- aaii bull ratio -- abx -- cmbx -- cdx -- vxo p&f -- SPX volatility curve -- VIX:VXO skew -- commodity screen -- cot -- conference board

Thursday, December 04, 2008

 

is the equity market cheap?


this has been covered before, but prieur de plessis offers an quantitative look at market valuation in comparison to trailing ten-year earnings and dividends.

the conclusion: similar to jeremy grantham's or james montier's, we have arrived as something like a "normal valuation" -- but further that there is no "normal". valuations typically only traverse the mean on the way to either extreme, and patience will likely yield a better opportunity.

i've come to feel, in the aftermath of reading nassim taleb and others, that for long-term holders the equity market is really a very good idea only at quite rare intervals -- when a whites-of-their-eyes opportunity arises, when one can buy the s&p for less than 8x trailing ten year earnings, with a dividend yield in excess of 9%.

perhaps happily for our long-term prospects, such an opportunity would seem to be approaching even if it may still be some years away.

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