In the previous post editorializing about why it’s a pig despite what conventional valuation metrics may say, we focused on the reasons that said metrics have remained okay. Namely, money has been cheapened relative to the stock market (the inflation worked for financial assets first and foremost in the post-2008 inflationary operation put in play by the hero, Ben Bernanke) and that money is the denominator of valuations, as if it’s all been a linear progression in both money and equity.
So anyway, here’s a headline (click it for the article) telling us…
Here is the interesting stuff. When analysts extrapolate in-line valuations they are not lying or trying to pull one over on you. They are not talking a faulty book. But what they are doing is using the breadcrumbs that in this case were first laid in 1988, extrapolating forward and not at all measuring what monetary policy has done to the picture (namely, kept it from turning into a fallen souffle).
This is the reason I play the game, resist going whole hog bear idealist and watch for monetary and market-based clues. Week to week, month to month… the Pig AKA the Good Ship Lollipop sails on.
For some context, Kramer used earnings data going back to 1988 and projections through to 2020, then overlaid that with a chart of the S&P for what he says is a self-explanatory reflection of where we stand.
And, more importantly, where we’re headed.
Kramer explained that the numbers show attractive equity valuations and, if corporate earnings continue to increase as expected, the market “has a great distance to rise” in the coming years.
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