The past few years has seen a growing discussion around how to best value the market. More recently, the argument turned toward just how overvalued is the market and what does it mean? I thought I’d try to answer those two questions.
Several market valuation tools have become more common since the crisis. I use the term loosely because none of the valuation tools are 100% accurate and some are terribly inaccurate. In reality, people want a market timing tool. Keep that in mind while reading further.
One of the more popular tools is the CAPE ratio (Cyclically Adjusted PE Ratio) or Shiller PE named after it’s creator, Robert Shiller. Shiller is a Yale professor who realized the market is hardly efficient, wanted a way to measure that inefficiency, and wrote a book about it appropriately named Irrational Exuberance. Continue Reading…
The quotes of many great investors are often misused for a number of reasons. Peter Lynch is one of them. His most misused, and arguable misunderstood, quote is – Invest in what you know. Those five words are taken out of context all the time.