Valuation Myths

摘要

Valuations are too high for a long bull market, right? Wrong! The S&P 500 has averaged a 12% total annual return over the last 40 years. It began this four-decade run with prices that averaged, from 1962 through 1963, 18 times expected earnings. That is about where we are today (if you look at earnings before nonrecurring charges). Four decades ago, the ten-year Treasury bond was yielding somewhere around 5%. That's about where it is now. If these levels didn't hurt buyers of stocks in 1962-63, why should they hurt today's buyers? Why won't the next 40 years be as good as the last 40? If you say you don't have 40 years, only 5,1 would point out that 1963-68 was a good period in which to own stocks. Only one year? Okay, 1964 had a great return.