No stock picks today – I took a day off to chill. Given the extraordinary rise in the stock market – I thought it would be a good time to review the valuation metrics I follow:
| Market Valuations: | Current | Mean | Delta |
| Shiller’s 10 Year PE Ratio: | 28.6 | 16.72 | 71.05% |
| Trailing 12 Month PE Ratio: | 25.90 | 15.64 | 65.60% |
| Tobin’s Q Ratio: | 1.02 | 0.68 | 50.00% |
| Market Cap to GDP: | 128.1 | 90.00 | 42.33% |
| Morningstar’s Fair Value: | 1.04 | 0.90 | 16.20% |
| Price to Sales: | 2.02 | 1.44 | 40.28% |
| Average Overvaluation: | 47.58% |
Two things to consider after reviewing these numbers:
- Just because the market is overvalued – does not mean it cannot become even more overvalued;
- It does not pay to short equities – you can’t time things like market crashes, so you are only fueling the next rally with your hard earned $$.
So, what should you do instead? I suggest you go to My Approach to Investing Page for answers.
Extra – here is a little background music for your Friday:
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