WSJ: Is Anything Cheap?

Great piece by the WSJ marking the 4 year anniversary of the stock market’s bottoming out on 3/9/09.  I wish the chart below provided some valuation metrics in addition to total return.  Here’s a quick stab at some valuation metrics.

Disclaimer: this post is more about highlighting a good article and cool chart than it is about providing a thorough overview of global valuations… maybe I’ll do that in a subsequent post.  

At around 18x LTM earnings the S&P doesn’t look wildly over valued but it’s not cheap either.  When using the cyclically adjusted (or Shiller) PE the market looks even more expensive (23.45x avg. inflation adjusted earnings from the last 10 years).  European equities on the other hand are quite cheap (unfortunately I don’t have the exact PEs handy).  EM as I understand is a mixed bag – again don’t have the breakdown or PEs handy.

The 10 year UST is overvalued – to what degree depends on your time frame (see chart).

Gold – there is no good way to value gold so whey don’t we skip this one.

Oil – unlike gold this at least has some supply / demand dynamic and is widely used for industrial purposes in our economy.  I don’t know what the marginal cost of production is or how the new unconventional sources of oil (e.g. shale) are impacting prices.  Just remember there is a cartel that helps set prices and has a vested interest in keeping the price in an elevated but palatable range (high enough to fill their pockets but not so high to make people by electric or natgas cars).


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