This article has flaws. For one, 1996 wasn't a bad time to be buying stocks. Look at the chart below (credit: Yahoo).
5 signs the market bulls are wrong
By Brett Arends at MarketWatch
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Everyone is cheering. Everyone is bullish. Standard & Poor’s 500-stock index just hit a new high. The Russell 2000 index of small cap stocks, which is typically even more boom-and-bust, has soared to new records. The government is back open, the Federal Reserve’s printing presses are on triple shifts, and it’s all good.
Oh, brother.
Irrational exuberance, anyone?
On Dec. 5, 1996, then-Fed Chairman Alan Greenspan famously warned about the stock-market bubble (which he then failed to rein in), calling it a manifestation of irrational exuberance.
Seventeen years on, a lot has changed, of course. (For one thing, chances are you’re reading this on your phone.) But I’m getting a horrible feeling of déjà vu… all over again.
1. Stock valuations are in bubble territory.
The dividend yield on the S&P 500 back in 1996 was 2%. Today? About 2%.
Stocks back then traded at about 28 times the average per-share earnings of the previous 10 years. Today, it’s 24 times. (This is a measure known as the Shiller or Graham & Dodd price/earnings ratio, after Yale finance professor Robert Shiller, or famous value investors Benjamin Graham and David Dodd.) This measure has been shown to have had a strong inverse correlation with future returns — in other words, the higher the figure when you buy stocks, typically the lower the subsequent return.
Keep reading 5 signs the market bulls are wrong – Brett Arends's ROI – MarketWatch.
