"...before this Great Bear ends, the S&P 500 will trade under 14x earnings and yield over 6% in dividends and will be undervalued by historical standards. Mark my words on this! Either stock prices will plunge dramatically in the next couple of years to get valuations back in line, or stock prices will trade sideways for a decade or more until earnings catch up. There will be no new Great Bull until stocks are really undervalued, period.
All these monthly valuation metrics really unmask the recent NASDAQ rally’s true character of being an echo bubble. Yes, the pure technical price action is great, but by any valuation measure the NASDAQ rally erupted out of very high valuations in both October and March and as it marches higher valuations are growing ever more extreme and unsustainable by the month!
Just as the DJIA 1929 and NASDAQ 2000 bubbles were marked by a speculative-mania-driven disconnect between stock prices and underlying fundamental corporate earnings power, so is this festering NASDAQ Echo Bubble we are witnessing today. While short-term speculators ready to sell at a moment’s notice can certainly ride foundationless rallies like this one, any long-term investors buying into this echo bubble today are committing financial suicide. This will collapse just like the real bubble before it did in 2000!
All throughout market history, real sustainable bull markets only gallop when they are launched from historically low valuations. Betting on high-valuation stocks before the grisly aftermath of a supercycle bubble bust fully runs its course is a recipe for disaster. Speculative manias, or mini ones like our echo bubble today, can run for awhile, but eventually fundamental gravity catches up and utterly crushes the mania."
mai nada
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