Source: https://www.linkedin.com/feed/update/urn%3Ali%3Ashare%3A6966805892126183424
#PE-#Ratio Among Other #Meaningful #Data are Now #Meaningless:
#Finance #Markets #Stocks #Price #Earning #Valuation #Analytics #AI
https://lnkd.in/gQtBXC2H: Charts below illustrate the dismal outlook for #total #returns that the Federal Reserve has encouraged by a decade of #zero-#interest #rate policy and resulting #yield-seeking #speculation by investors… Still, if investors can’t imagine the median price/revenue multiple dropping from its recent peak 3.6 to a trough of less than 1.5, when the long-term norm is actually below 1.0, the completion of the current #market cycle may bring a fair amount of distress… Have #investors looked at where #margins are here? They’re not just higher than the historical norm – they’re higher than at every point in history prior to the past two years.
A key feature of the bubble period since 1995 is that average valuations have been substantially above their long-term historical norms. That observation makes it tempting to assume that #valuations have simply “shifted” higher. As #Graham and #Dodd described this temptation in 1932, “Instead of judging the #market #price by established #standards of #value, the new era based its standards of value upon the market price.”
The ‘new era’ commencing in 1927 involved at bottom the abandonment of the analytical approach; and while emphasis was still seemingly placed on facts and figures, these were manipulated by a sort of pseudo-analysis to support the delusions of the period. The ‘new-era’ doctrine – that ‘good’ stocks (or ‘blue chips’) were sound investments regardless of how high the price paid for them – was at bottom only a means for rationalizing under the title of ‘investment’ the well-nigh universal capitulation to the gambling fever.
– Benjamin Graham & David L. Dodd, Security Analysis, 1934
This is the longest period of practically uninterrupted rise in #security #prices in our history… The #psychological #illusion upon which it is based, though not essentially new, has been stronger and more widespread than has ever been the case in this country in the past. This illusion is summed up in the phrase ‘the new era.’ The phrase itself is not new. Every period of #speculation rediscovers it… During every preceding period of stock speculation and subsequent collapse business conditions have been discussed in the same unrealistic fashion as in recent years. There has been the same widespread idea that in some miraculous way, endlessly elaborated but never actually defined, the fundamental conditions and requirements of progress and prosperity have changed, that old economic principles have been abrogated… that business #profits are destined to grow faster and without limit, and that the #expansion of #credit can have no end.
– The Business Week, November 2, 1929
Bloomberg Businessweek: BRINT.com: What Every #CEO Should Know.:
Global Risk Management Network, LLC: Future of AI-Computer Science-Data Science-Finance Are All Here
