RESOURCES

Stock market valuations have clearly been rising since early 1982. In fact, investors now pay over five times as much as in 1982 for a dollar of cyclically adjusted earnings, and 11% more than in 1929, when economist Irving Fisher declared, “stock prices have reached ‘what looks like a permanently high plateau.’” Indeed. Nearly a century later, have we finally entered a “permanently high plateau”? Are fat pills and algorithms able to do what online commerce and cat videos couldn’t? Readers must make up their own minds. The data hasn’t supported this yet, but investing is all about looking forward. As you do, I hope you look forward to my next article on what current valuations mean for future returns.

This book was a pretty easy read, though at times it felt like a rant and was redundant. On the positive side, he calls out that many investors are not being well served by their brokers or advisors. Many people, especially with very simple financial situations may be able to take care of their own investing needs. He rightly calls out so-called advisors who are actually sales people and who don’t work under the fiduciary standard, which requires working in their clients’ best interests. He sheds light on how hard it is to pick stocks or to time the market, and how much time and money is wasted in this endeavor.

As we turned the calendar to 2024, it was 48% above its 50-year average and 21% above is average over the last 20 years, up from 35% and 11%, respectively a year ago. This trails only 1929, 1999-2000 and 2021 for the highest valuation in history.