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« The Most Important Economic Questions for Investors | Main | Guess the Pundit »

April 01, 2012

Comments

oldprof

Ilia -- I have seen the research you cite, and I do have an opinion. I try to be very careful in doing research reviews. The Fed encourages their hundreds of economists to do independent research -- like academics -- and I think it is great.

I have written on this topic at great length. The current P/E ratio is mostly determined by those who manage big money and have a choice of assets. This article is a starting point for what I have written, but I urge you to follow the links to see more.

http://oldprof.typepad.com/a_dash_of_insight/2010/12/why-the-market-multiple-will-be-higher-in-2011.html

While the specific prediction did not play out last year, that was because the skepticism about earnings seems to be in perpetual mode, despite the evidence to the contrary.

At some point there will be a major change in attitude -- about economic growth, about future inflation, about the desirability of bonds, and about the appropriate equity risk premium.

Once again -- sorry to be slow in responding, but I hope this is helpful.

Jeff

Eric

I'm trying to complete your quiz. I know the current percentage of stocks above the 200dma is 73%, about where it was last spring (2011) when things went bearish. However, that was largely driven by Europe fears and once they faded from news saturation we've rebounded. I think the answer is that it doesn't really matter, at least not on its own. It will take much more than a simple comparison of stocks above their 200 dma to act upon. I do find it interesting to note that Felix has gone from neutral to bullish when the media coverage seems to be cautious/nervous/bearish.

Ilia

Thanks, Pacioli!

Jeff, I understand that you'd prefer replies, which are pertinent to your articles and time frame. Please accept my apology for my question, which may look not so relevant. But I really appreciate your opinion and believe a lot of your readers would love to see your thoughts on long-term market trends based on objective factors. Regardless, it is a pleasure reading you. Thanks again!

Pacioli

@ Ilia -

That link did not work.

I think this one should work properly:

http://www.frbsf.org/publications/economics/letter/2011/el2011-26.html

Ilia

Jeff, very thorough analysis as always. But all this is either for short-term or for the year or two. What about longer term? What do you think about aging of population as a driving force of this secular bear market and FRBSF prediction (http://www.frbsf.org/publications/economics/letter/2011/el2011-26.html) that it will last till 2025 and only then recover? Sounds very compelling to me… Thanks in advance!

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