Thursday, December 04, 2008
is the equity market cheap?
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.