Market Update

Econbrowser has a great analysis of where we stand market valuation wise. Using Prof Shiller's data he posts the following charts:
(1) 17% downside to be back to average

(2) A chart comparing PE and the following 10 year nominal returns of the S&P500. At the current PE do not expect much in the next years if history is any guide



(3) And among others a chart comparing the dividend yields vs tips' and bond yields.
While equities do not strike as bargains they still compare favourably to bonds.


He concludes: "A buyer of stocks today is usually getting a higher immediate yield than on TIPS, in addition to prospects of future dividend growth. Just as they did in the 19th century, stocks as priced today should give you a significantly better return than bonds"

"The Capitalism Distribution"

The following charts apparently appear in Meb Faber's new book the Ivy Portfolio. (h/t designing better futures who refers to a study done by Blackstar funds)



The study looks at individual stock returns from 1983 to 2007. Over this long time period 25% of the stocks were responsible for all of the gains.


Here are Blackstar Funds' interesting conclusions (my highlights in bold):
"39% of stocks had a negative lifetime total return (2 out of every 5 stocks are a money losing investment)
18.5% of stocks lost at least 75% of their value (Nearly 1 out of every 5 stocks is a really bad investment)
64% of stocks underperformed the Russell 3000 during their lifetime (Most stocks can’t keep up with a diversified index)
A small minority of stocks significantly outperformed their peers (Capitalism yields a minority of big winners that all have something in common)"