Wednesday, November 3, 2010

Are US stocks over-valued?

Ask your investment advisor why stocks are above their long-run average P/E ratio.  If she obfuscates, don't trust her advice.

2 comments:

  1. I suspect the massive expansion in the monetary base has made stocks better future expect relative value (to dollars) than they would otherwise be.

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  2. Doc - I don't understand your logic. How does expanding the monetary base create higher expected returns? Expected returns is a function of the risk premium of each stock as well as how it correlates with the market. In what way do you think that the monetary supply affects these conditions?

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