Tuesday, April 26, 2011

History Bodes Ill for Stock Market

"There have been only four other occasions over the last century when equity valuations were as high as they are now, according to a variant of the price-earnings ratio that has a wide following in academic circles. Stocks on each of those four occasions would soon suffer big declines."

Mark Hulbert

Read more of Mark's article by clicking on the above blog post title.

Investing Lesson

I watch the Shiller PE 10 Ratio very closely and am concerned about its current high reading. That said, it has been above 20 for over one year. Markets can remain over or under valued for long periods of time, before a significant adjustment takes place.