Market mean reversions are all psychological. It's basically at some point that investors go, I'm out and they're all out at one time. And we've seen some of that this year. But there's an interesting conundrum that's going to be coming up here because again, let's take a look at PE. If earnings come down, price is going to move up; if it doesn't, valuations will stay the same. So here's the bad news: Earnings are going to come down, but prices have to fall faster than expected.
IN THIS EPISODE, YOU’LL LEARN:
09:18 - Understanding the basics of valuations and how to interpret price multiples.
17:00 - What the Shiller P/E (CAPE) ratio is, and why it is telling us future returns are expected to be low going forward.
25:46 - What Lance thinks are some catalysts that could cause the market to mean revert to historically normal valuation levels.
31:35 - Why the Buffett Indicator is a valuable valuation tool and why it is saying markets are overvalued today.
38:05 - The relationship between earnings and GDP and why EPS cannot grow faster than GDP in the long run.
49:50 - Why Lance thinks bonds are the best investment right now and what investment strategy he recommends.
And much, much more!
*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.
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