A Viral Market Update IX: A Do-it-Yourself S&P 500 Valuation

It has been close to four weeks since my last viral market update, and I could come up with a whole host of excuses for the delay, but the truth is that I have not had much to say that is original, and I am naturally lazy. That said, markets have settled in, mostly with an upward bias in these last few weeks, and the big question, as US equities climb back towards pre-crisis levels is whether the market has lost its bearings. After all, the news, whether on macroeconomic indicators or company-level earnings, is not just bad, but historically so, and it seems incongruous that markets should be rising, when  consumer confidence and spending are plummeting, the ranks of the unemployed rising and professional economists are painting a picture of impending doom. There are some market gurus who are pointing to this disconnect as evidence that markets are just wrong and that a major correction is around the corner, but their credibility is undercut by the fact that many in this group have been forecasting this correction for the last decade,  and with metrics (PE, CAPE, Shiller PE) that have lost their potency. I have absolutely no shame in admitting that I am not a market timer, but I do believe that embedded in market action is always a link, though sometimes tenuous, to fundamentals. In this post, I will start with my usual updates of what has transpired in the last few weeks across markets, in general, and (Read more...)