2019-08-24 14:38:00 Sat ET
stock market gold oil stock return s&p 500 asset market stabilization asset price fluctuations stocks bonds currencies commodities funds term spreads credit spreads fair value spreads asset investments
Warren Buffett warns that the current cap ratio of U.S. stock market capitalization to real GDP seems to be much higher than the long-run average benchmark. With the current cap ratio of 146.4x, U.S. stock market capitalization represents at least 146 times American national income per year. This current cap ratio exceeds the long-run average benchmark of 80x by more than 80%, and is historically second to the peak of irrational exuberance near 148.5x during the dotcom bubble back in March 2000. From 2018Q3 to 2019Q2, the S&P 500 delivers a 12-month net profit of about $135 per share, and the S&P 500 aggregate share price rises to $3000+ per share. The equivalent S&P 500 P/E ratio thus hovers in the broad range of 22x to 24x. This narrow range well exceeds the long-run average benchmark of 15x to 16x. Long-term stock market capitalization and corporate profitability should move in tandem. If these key metrics stray too far apart, it can be prohibitively expensive for U.S. public corporations to get back to balance.
From this fundamental perspective, the normal stock market forces may pull equity valuation back to the long-run average yardsticks relative to U.S. national income and corporate profitability.
If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.
2018-06-29 11:41:00 Friday ET
Amazon acquires an Internet pharmacy PillPack in order to better compete with Walgreens Boots Alliance, CVS Health, Rite Aid, and many other drug distributo
2019-08-08 09:35:00 Thursday ET
Kobe Bryant and several other star athletes have been smart savvy investors. In collaboration with former Web.com CEO Jeff Stibel, the NBA champion invests
2018-03-02 12:34:00 Friday ET
White House top economic advisor Gary Cohn resigns due to his opposition to President Trump's recent protectionist decision on steel and aluminum tariff
2021-02-10 06:28:00 Wednesday ET
Eric Posner and Glen Weyl propose radical reforms to resolve key market design problems for better democracy and globalization. Eric Posner and Glen Weyl
2019-01-07 18:42:00 Monday ET
Neoliberal public choice continues to spin national taxation and several other forms of government intervention. The key post-crisis consensus focuses on go
2017-12-09 08:37:00 Saturday ET
Michael Bloomberg, former NYC mayor and media entrepreneur, criticizes that the Trump administration's tax reform is a trillion dollar blunder because i