Valuation fundamentals – or, we’re heading for another crash

Posted on / Lex / Macroeconomics & markets - Valuation fundamentals .

Lex says:

Then there are equity markets. Here it is best to use long-run, adjusted earnings based valuations, or methodologies comparing prices to real assets, such as replacement ratios. On such measures, US stocks are now almost 50 per cent overvalued, according to Smithers & Co. Unfortunately historical data are less reliable for other equity markets, but most also look expensive on this basis, albeit to a lesser extent.

I agree. I have said so for a long time. As a write the market is at 5,340 - near the 2009 high. Put it 50% over valued and it should be 3,560.

I suggested even lower was right a while back - at around 2,900. Maybe I was a little cautious, but those pinning on their hopes on equities right now are simply heading to be losers in the next financial collapse.

And it won't be far off coming.