Shiller P/E and the current market

[Guest]

Right now the Shiller PE is around 19 - a bit higher than the long, long term historical average, but right around its 45 year average. However, in an article from the WSJ this was stated by Burton Malkiel:

 

"First, I believe that stocks today are cheap. Price/earnings multiples are just over 14 and forward P/E multiples, which use forecasted earnings, have shrunk to less than 12. These multiples are low relative to historical precedent and are especially low when considered in comparison to a 10-year Treasury yield of 2.5%. Dividend yields of 2.5% also compare favorably with 10-year Treasurys. Multiples do not look cheap relative to average 10-year earnings (the so-called Shiller P/E multiples), but today's earnings are so much higher than average earnings that a 10-year average is not a good estimate of today's corporate-earning capacity.

 

Do you guys think he is right with that?

 

Here is the full article for those who are interested:

 

http://online.wsj.com/article/SB10001424053111903366504576492512709525754.html

[bluedevil]

No.  Right now corporate margins are extremely high.  Chances are they regress to the mean.  Exactly the reason that the 10-year average has proven a superior valuation measure over time.

[mhdousa]

Right now the Shiller PE is around 19 - a bit higher than the long, long term historical average, but right around its 45 year average. However, in an article from the WSJ this was stated by Burton Malkiel:

 

"First, I believe that stocks today are cheap.

 

 

I don't understand.  I thought asset prices represent all publicly available information. 

 

[Myth465]

LOL you cant be serious after last week and this week. Asset prices only represent supply and demand......

[mhdousa]

LOL you cant be serious after last week and this week. Asset prices only represent supply and demand......

 

What? Stocks don't follow a random walk?!?!?!

 

[Myth465]

LOL I am from Texas, we dont do sarcasm down here.  ;D