Valuation-Informed Indexing #492: Every Economic Stimulus Should Be Matched With an Economic Deterrent

I have posted Entry #492 to my weekly Valuation-Informed Indexing column at the Value Walk site. It is called Every Economic Stimulus Should Be Matched With an Economic Deterrent.

Juicy Excerpt: There is a sense, of course, in which every price crash is a black swan event. Had most of us known the crash was coming, we would have taken money out of the market and the price crash would have arrived at an earlier time. By definition a crash has to come as a shock.

But both the 2008 crash and the 2020 crash are similar in one very important way. Both began at times of insanely high CAPE values. All crashes of lasting significance do. So it could be said that black swans become predictable when stock prices rise to unsustainable levels. The particulars cannot be known in advance. But when we reach the price levels that applied prior to the 2008 crash and the 2020 crash, we know that in not too long a time we will be seeing some terrible economic development that will send prices falling hard.