Please skip if you're not into this.
So, I've been trying to make sense of Robert's Schiller's PE theory. The basic, layman gist that I am currently understanding is that if the market always regresses to the mean, then it's a matter of calculating how far the market is currently off from the mean right?
Now, Schiller is a smart guy. I don't deny that. It's just that... well, there's a lot of controversy surrounding the question of HOW effective this sort of back-testing is. Could 10 years, or 20 years, or 30 years of historical market performance give us an insight as to whether the current market is over-bought or over-sold? (Remember me talking about a serious investment troll? Yeah, that's what this is about, and I hope he doesn't find me here.)
Ignoring the issue of what exactly does "predictiveness" mean for a second, I came across a study that suggests that while PE/10 (/20, /30) has some predictiveness, there is another measure, Tobin's q, that is much more predictive.
Now, if you do buy into this, both Schiller's PE and Tobin's q suggest that the market is supposedly, as of the month of June, over-valued at somewhere around 15%. Not exactly beaming news for traders. (I'm still buying and holding though.)
Anyways,
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On the lighter side of the investing news, I just found out that there is an index that measures the consumer sentiment of millionaires and the "affluent" (those with net worth greater than $500k). Known as the Spectrem Millionaire Investor Index (SMII) and Spectrem Affluent Investor Index (SAII). You can find their June graph here.
Hehe, I guess there is an index for everything.
July 3rd, 2009 at 03:16 am 1246590960
July 3rd, 2009 at 04:06 am 1246593966