I remember clipping this graphic out of the newspaper in college (I may still have it somewhere). Although it seems to me the current value is closer to previous market tops than bottoms, no? From Fortune mag:
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The chart reconciles nicely with a study on Hussman Funds site which notes that historically the market traded between .7 and 1.0 Price to Sales in bear/bull markets. Strong bear markets dropped as low as .4/.5 but more often to the .6/.7 range. So…. where might that suggest we are going?
It's all LIES!!!!!!
AAAAAAAAAIIIIIIGGGGGHHHHHHHH!!!!!!
Don't you need to normalize for the amount of GNP contributed by public companies? I assume that the ratio of public to private companies has gone up whish would explain at least somewhat the systematic increase this ratio over time. Although I certainly agree that it seems far from an obvious buy signal…but you really only need to look at historical aggregate P/E to see that…much more direct, no?
I fail to understand how that chart can be construed to give the signal that stocks are “screaming buys” and “opportunities of a liftime”. especially given that our economy is clearly in worst shape now than anytime other than 1930's. seems to me, stocks are overpriced given this data and we should wait to see tham trading at under 50% of GDP. NO?
The credit markets expanded so greatly over the last twenty or so years, that I wonder if market value of equities is the right numerator. The ratio of Household Net Worth to Nominal GDP is still frighteningly high versus historic levels.
If you think that this market overall is worse than the late 70's, early 80's; you either have a bad memory, or you are too young to know. I am definately too young to fully understand the climate during the Great Depression, but I highly doubt we are experiencing anything like that currently.
If you think that this market overall is worse than the late 70's, early 80's; you either have a bad memory, or you are too young to know. I am definately too young to fully understand the climate during the Great Depression, but I highly doubt we are experiencing anything like that currently.