r*m
2 楼
FORTUNE -- Don't believe the bulls who predict a new era of rising stock
prices. Sure, their arguments sound convincing: Confidence will surge
following the arrival of a new, business-friendly Congress, the U.S. economy
always rebounds strongly after a deep recession -- it's just taking longer
this time. Or, it's the nature of the market to post big gains after a
decade or more of poor returns.
Unfortunately, the basic math doesn't support the optimists' case. Put
simply, the stock market is in a box that makes high future returns
virtually impossible for people who invest in the S&P 500 or another index
replicating the overall market. The reason is that corporate earnings are
far outpacing the slow, grinding recovery. In fact, they're practically at a
cyclical peak -- and possibly in a mini-bubble. At the same time, investors
are paying an extremely big price for those already robust profits.
1Email Print CommentToday's premium multiples wouldn't be a problem if
profits could grow at a rapid pace -- in theory at least, high price-to-
earnings ratios are a signal that they're destined to do just that.
It won't happen this time, for a simple reason: When earnings are already at
lofty levels, they typically stagnate or fall rather than grow. Hence, one
route to rising equity prices is effectively blocked by the rise in profits
that's already occurred, and the other is closed by high prices. Even if the
economy improves dramatically, prices are far more likely to fall than rise
. The rich rewards will go the patient contrarians who buy not at these
prices, but after a major correction.
Earnings explosion
Let's examine the most surprising feature of the tepid recovery, the
remarkable resurgence in profits. For 2010, S&P reported earnings are on
track to reach $71 per share. That's the second best number in history. It's
39% higher than in 2009, a strong comeback year after the wipeout in 2008,
and just 15% below the record of $81.51 posted in 2006. Corporate profits
are currently a strong 11.1% of GDP, versus their long-term average of 9.2%.
Why the earnings explosion? Starting in late 2008, U.S. companies chopped
costs, especially labor, as if preparing not for a recession, but a
depression. The cataclysm didn't come. Nevertheless, corporations are still
operating with ultra-lean workforces, leading to a big jump in productivity.
They're also benefiting from the steep fall in interest payments on their
debt. The result: An amazing surge in profits.
What must happen for investors to garner strong returns when earnings are
already commanding them, as they are now? History shows that profits can't
grow from heights like these, at least not for long. As a result, investors
must buy in at lower-than-average PE multiples that have room to expand when
earnings rebound a few years hence, and also collect relatively high
dividend yields, another reward from low equity prices.
None of those conditions exist today. Right now, the PE multiple for the S&P
500 seems reasonable at around 14.5. But remember, that number is
calculated on near-record earnings that are likely to fall or at least move
sideways with inflation for years to come.
The best measure of whether stocks are cheap or expensive -- and what that
means for their future performance -- is Yale economist Robert Shiller's
Cyclically Adjusted Price/Earnings ratio, or CAPE. Shiller smoothes the
extreme peaks and valleys in earnings by taking a ten-year average of
inflation-adjusted profits, and essentially saying that number, not today's
volatile figure, is the best snapshot of what companies earn on a durable,
long-term basis. Today, the Shiller PE stands at around 21.
That's a big number -- the average PE since 1888 is around 16, and stood at
14.6 before the 20 years of abnormally high valuations starting in the early
1990s, a frothy period that included the tech bubble. It's also a general
rule that the higher the CAPE when investors buy shares, the lower the
future returns. Cliff Asness, chief of hedge fund AQR Capital, calculates
that entering the market at a multiple of between 11.9 and 14.6 brought a 10
% median annual gain a decade later. (The Asness analysis covers the Shiller
data from 1927 to 2004.) By contrast, those who buy the S&P 500 at a
multiple of around 20 get something between the mid-single digits, and a
slightly negative return.
Betting on a 30% drop
Today's investors face that daunting fate. Dividends won't help much: the
current yield is just 1.9%, versus an historic average of 4.75%.
High multiples, like the PE we're seeing now, explain why equity performance
has been underwhelming for almost two decades. The late 2008 period marked
the first time since 1992 that the Shiller PE fell below 20. Investors who
bought into the S&P at around today's PE in early 1992 made paltry returns
of between 5% and 6%, including dividends. And that's after the huge, 45%
rebound in the past 18 months.
It's indeed possible that stocks are correctly priced, and
prices. Sure, their arguments sound convincing: Confidence will surge
following the arrival of a new, business-friendly Congress, the U.S. economy
always rebounds strongly after a deep recession -- it's just taking longer
this time. Or, it's the nature of the market to post big gains after a
decade or more of poor returns.
Unfortunately, the basic math doesn't support the optimists' case. Put
simply, the stock market is in a box that makes high future returns
virtually impossible for people who invest in the S&P 500 or another index
replicating the overall market. The reason is that corporate earnings are
far outpacing the slow, grinding recovery. In fact, they're practically at a
cyclical peak -- and possibly in a mini-bubble. At the same time, investors
are paying an extremely big price for those already robust profits.
1Email Print CommentToday's premium multiples wouldn't be a problem if
profits could grow at a rapid pace -- in theory at least, high price-to-
earnings ratios are a signal that they're destined to do just that.
It won't happen this time, for a simple reason: When earnings are already at
lofty levels, they typically stagnate or fall rather than grow. Hence, one
route to rising equity prices is effectively blocked by the rise in profits
that's already occurred, and the other is closed by high prices. Even if the
economy improves dramatically, prices are far more likely to fall than rise
. The rich rewards will go the patient contrarians who buy not at these
prices, but after a major correction.
Earnings explosion
Let's examine the most surprising feature of the tepid recovery, the
remarkable resurgence in profits. For 2010, S&P reported earnings are on
track to reach $71 per share. That's the second best number in history. It's
39% higher than in 2009, a strong comeback year after the wipeout in 2008,
and just 15% below the record of $81.51 posted in 2006. Corporate profits
are currently a strong 11.1% of GDP, versus their long-term average of 9.2%.
Why the earnings explosion? Starting in late 2008, U.S. companies chopped
costs, especially labor, as if preparing not for a recession, but a
depression. The cataclysm didn't come. Nevertheless, corporations are still
operating with ultra-lean workforces, leading to a big jump in productivity.
They're also benefiting from the steep fall in interest payments on their
debt. The result: An amazing surge in profits.
What must happen for investors to garner strong returns when earnings are
already commanding them, as they are now? History shows that profits can't
grow from heights like these, at least not for long. As a result, investors
must buy in at lower-than-average PE multiples that have room to expand when
earnings rebound a few years hence, and also collect relatively high
dividend yields, another reward from low equity prices.
None of those conditions exist today. Right now, the PE multiple for the S&P
500 seems reasonable at around 14.5. But remember, that number is
calculated on near-record earnings that are likely to fall or at least move
sideways with inflation for years to come.
The best measure of whether stocks are cheap or expensive -- and what that
means for their future performance -- is Yale economist Robert Shiller's
Cyclically Adjusted Price/Earnings ratio, or CAPE. Shiller smoothes the
extreme peaks and valleys in earnings by taking a ten-year average of
inflation-adjusted profits, and essentially saying that number, not today's
volatile figure, is the best snapshot of what companies earn on a durable,
long-term basis. Today, the Shiller PE stands at around 21.
That's a big number -- the average PE since 1888 is around 16, and stood at
14.6 before the 20 years of abnormally high valuations starting in the early
1990s, a frothy period that included the tech bubble. It's also a general
rule that the higher the CAPE when investors buy shares, the lower the
future returns. Cliff Asness, chief of hedge fund AQR Capital, calculates
that entering the market at a multiple of between 11.9 and 14.6 brought a 10
% median annual gain a decade later. (The Asness analysis covers the Shiller
data from 1927 to 2004.) By contrast, those who buy the S&P 500 at a
multiple of around 20 get something between the mid-single digits, and a
slightly negative return.
Betting on a 30% drop
Today's investors face that daunting fate. Dividends won't help much: the
current yield is just 1.9%, versus an historic average of 4.75%.
High multiples, like the PE we're seeing now, explain why equity performance
has been underwhelming for almost two decades. The late 2008 period marked
the first time since 1992 that the Shiller PE fell below 20. Investors who
bought into the S&P at around today's PE in early 1992 made paltry returns
of between 5% and 6%, including dividends. And that's after the huge, 45%
rebound in the past 18 months.
It's indeed possible that stocks are correctly priced, and
s*z
3 楼
请问，要是美国国内到达，比如terminal 7，要去国际出发TBIT乘国航，可以走得过去
吗？听说机场正在renovation，有影响吗？
走过去，不用在安检，对吧？
谢谢。
吗？听说机场正在renovation，有影响吗？
走过去，不用在安检，对吧？
谢谢。
x*k
4 楼
一部分印度学生宣称作弊是人与生俱来的权利，是人的民主权利。这一现象可能与当地
情况有关。在印度北方邦，大学考试体制中腐败现象非常普遍。有钱人可以通过行贿买
来好成绩。年轻人中甚至还有一个特殊群体，在学生和贪婪的官员之间作掮客。此外，
还有一个非凡的学生阶层，他们政治关系网四通八达、在当地名气相当大，监考官根本
不敢碰他们。穷学生因此认为有钱、有权的人能欺骗作假，我们为什么不能呢？1990年
代早期，北方邦就曾发生过支持作弊的集会。当时的省长妥协，接受了集会要求，废除
反抄袭法。实际上等于给学生作弊开绿灯。争取作弊权的运动并不奇怪，这对今日印度
具有讽刺意味。
情况有关。在印度北方邦，大学考试体制中腐败现象非常普遍。有钱人可以通过行贿买
来好成绩。年轻人中甚至还有一个特殊群体，在学生和贪婪的官员之间作掮客。此外，
还有一个非凡的学生阶层，他们政治关系网四通八达、在当地名气相当大，监考官根本
不敢碰他们。穷学生因此认为有钱、有权的人能欺骗作假，我们为什么不能呢？1990年
代早期，北方邦就曾发生过支持作弊的集会。当时的省长妥协，接受了集会要求，废除
反抄袭法。实际上等于给学生作弊开绿灯。争取作弊权的运动并不奇怪，这对今日印度
具有讽刺意味。
x*x
5 楼
怕了吧？还要创新高
l*n
6 楼
可以走过去,影响不大
要重新安检
【在 s*******z 的大作中提到】
: 请问，要是美国国内到达，比如terminal 7，要去国际出发TBIT乘国航，可以走得过去
: 吗？听说机场正在renovation，有影响吗？
: 走过去，不用在安检，对吧？
: 谢谢。
要重新安检
【在 s*******z 的大作中提到】
: 请问，要是美国国内到达，比如terminal 7，要去国际出发TBIT乘国航，可以走得过去
: 吗？听说机场正在renovation，有影响吗？
: 走过去，不用在安检，对吧？
: 谢谢。
s*u
8 楼
Do you really think that CAPE is a good timing indicator for you to short
the market?
economy
longer
【在 r*m 的大作中提到】
: FORTUNE -- Don't believe the bulls who predict a new era of rising stock
: prices. Sure, their arguments sound convincing: Confidence will surge
: following the arrival of a new, business-friendly Congress, the U.S. economy
: always rebounds strongly after a deep recession -- it's just taking longer
: this time. Or, it's the nature of the market to post big gains after a
: decade or more of poor returns.
: Unfortunately, the basic math doesn't support the optimists' case. Put
: simply, the stock market is in a box that makes high future returns
: virtually impossible for people who invest in the S&P 500 or another index
: replicating the overall market. The reason is that corporate earnings are
the market?
economy
longer
【在 r*m 的大作中提到】
: FORTUNE -- Don't believe the bulls who predict a new era of rising stock
: prices. Sure, their arguments sound convincing: Confidence will surge
: following the arrival of a new, business-friendly Congress, the U.S. economy
: always rebounds strongly after a deep recession -- it's just taking longer
: this time. Or, it's the nature of the market to post big gains after a
: decade or more of poor returns.
: Unfortunately, the basic math doesn't support the optimists' case. Put
: simply, the stock market is in a box that makes high future returns
: virtually impossible for people who invest in the S&P 500 or another index
: replicating the overall market. The reason is that corporate earnings are
s*z
9 楼
多谢。太久没在那儿转机，都不记得了。
L*n
10 楼
每天听RIM一声叫唤，心里特别的踏实。呵呵。
P*s
11 楼
Thanks, RIM.
I will exit the market when you become a bull.
economy
longer
【在 r*m 的大作中提到】
: FORTUNE -- Don't believe the bulls who predict a new era of rising stock
: prices. Sure, their arguments sound convincing: Confidence will surge
: following the arrival of a new, business-friendly Congress, the U.S. economy
: always rebounds strongly after a deep recession -- it's just taking longer
: this time. Or, it's the nature of the market to post big gains after a
: decade or more of poor returns.
: Unfortunately, the basic math doesn't support the optimists' case. Put
: simply, the stock market is in a box that makes high future returns
: virtually impossible for people who invest in the S&P 500 or another index
: replicating the overall market. The reason is that corporate earnings are
I will exit the market when you become a bull.
economy
longer
【在 r*m 的大作中提到】
: FORTUNE -- Don't believe the bulls who predict a new era of rising stock
: prices. Sure, their arguments sound convincing: Confidence will surge
: following the arrival of a new, business-friendly Congress, the U.S. economy
: always rebounds strongly after a deep recession -- it's just taking longer
: this time. Or, it's the nature of the market to post big gains after a
: decade or more of poor returns.
: Unfortunately, the basic math doesn't support the optimists' case. Put
: simply, the stock market is in a box that makes high future returns
: virtually impossible for people who invest in the S&P 500 or another index
: replicating the overall market. The reason is that corporate earnings are
q*u
12 楼
什么样的屁股，就要什么样的脑袋。
【在 L****n 的大作中提到】
: 每天听RIM一声叫唤，心里特别的踏实。呵呵。
【在 L****n 的大作中提到】
: 每天听RIM一声叫唤，心里特别的踏实。呵呵。
d*w
13 楼
Rim内心阴暗，妨碍大家的财路。：）
我也看空，但是不敢吭声。
我也看空，但是不敢吭声。
k*n
14 楼
thick road, thick road
【在 L****n 的大作中提到】
: 每天听RIM一声叫唤，心里特别的踏实。呵呵。
【在 L****n 的大作中提到】
: 每天听RIM一声叫唤，心里特别的踏实。呵呵。
g*4
15 楼
Will be wrong again? will be bashed once more?
I*n
16 楼
how can you trade based on this type of crap?
economy
longer
【在 r*m 的大作中提到】
: FORTUNE -- Don't believe the bulls who predict a new era of rising stock
: prices. Sure, their arguments sound convincing: Confidence will surge
: following the arrival of a new, business-friendly Congress, the U.S. economy
: always rebounds strongly after a deep recession -- it's just taking longer
: this time. Or, it's the nature of the market to post big gains after a
: decade or more of poor returns.
: Unfortunately, the basic math doesn't support the optimists' case. Put
: simply, the stock market is in a box that makes high future returns
: virtually impossible for people who invest in the S&P 500 or another index
: replicating the overall market. The reason is that corporate earnings are
economy
longer
【在 r*m 的大作中提到】
: FORTUNE -- Don't believe the bulls who predict a new era of rising stock
: prices. Sure, their arguments sound convincing: Confidence will surge
: following the arrival of a new, business-friendly Congress, the U.S. economy
: always rebounds strongly after a deep recession -- it's just taking longer
: this time. Or, it's the nature of the market to post big gains after a
: decade or more of poor returns.
: Unfortunately, the basic math doesn't support the optimists' case. Put
: simply, the stock market is in a box that makes high future returns
: virtually impossible for people who invest in the S&P 500 or another index
: replicating the overall market. The reason is that corporate earnings are
t*e
17 楼
The fact is inflation is on the way.
f*e
18 楼
Support rim.
I'm slowly reducing my positions, and I'm definitely not going to add any
position before another adjustment. I'm not a day trader.
economy
longer
【在 r*m 的大作中提到】
: FORTUNE -- Don't believe the bulls who predict a new era of rising stock
: prices. Sure, their arguments sound convincing: Confidence will surge
: following the arrival of a new, business-friendly Congress, the U.S. economy
: always rebounds strongly after a deep recession -- it's just taking longer
: this time. Or, it's the nature of the market to post big gains after a
: decade or more of poor returns.
: Unfortunately, the basic math doesn't support the optimists' case. Put
: simply, the stock market is in a box that makes high future returns
: virtually impossible for people who invest in the S&P 500 or another index
: replicating the overall market. The reason is that corporate earnings are
I'm slowly reducing my positions, and I'm definitely not going to add any
position before another adjustment. I'm not a day trader.
economy
longer
【在 r*m 的大作中提到】
: FORTUNE -- Don't believe the bulls who predict a new era of rising stock
: prices. Sure, their arguments sound convincing: Confidence will surge
: following the arrival of a new, business-friendly Congress, the U.S. economy
: always rebounds strongly after a deep recession -- it's just taking longer
: this time. Or, it's the nature of the market to post big gains after a
: decade or more of poor returns.
: Unfortunately, the basic math doesn't support the optimists' case. Put
: simply, the stock market is in a box that makes high future returns
: virtually impossible for people who invest in the S&P 500 or another index
: replicating the overall market. The reason is that corporate earnings are
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