Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“their true value (x)”
there is no such thing as the “true value” of a stock
We disagree.
It’s hard to identify the true value of an individual stock. Warren Buffett does a good job of it. But I would not feel comfortable trying to do it.
It’s very different when you are talking about the value of the market as a whole. That can be identified with a high (but not perfect) level of accuracy. U.S. stocks have been generating a return of 6.5 percent real for as long as there has been a market. That’s a CAPE value of 17. We all should be working together to be sure that the CAPE value never rises too much above that.
Today’s CAPE value of 35 is a national scandal. In the event that stocks continue to perform in the future anything at all as they have always performed in the past, our collective decision to tolerate a CAPE value that high is going to destroy millions of lives. I stand by the statement that I have been making consistently since the afternoon of May 13, 2002 — we need to open every discussion board and blog on the internet to honest posting re the last 41 years of peer-reviewed research in this field, without a single exception.
My best wishes to you.
Rob
feed twitter twitter facebook