The Market is Expensive: Should You Care? | The Practical Implications of Market Valuation

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Күн бұрын

In this episode we dive into the world of market valuation. We look at the major valuation metrics used to value the market and what they are and are not useful for from an investing perspective. We also look at value spreads, cross country valuations and expected returns and delve into the practical applications of valuation data in financial planning, considering factors such as time horizons, liability-driven investing, and individual circumstances.
00:00 - Introduction to the episode and hosts
00:33 - Current market valuation and the S&P 500 P/E ratio
02:00 - Importance of understanding the numerator and denominator in valuation ratios
05:19 - Outliers and their impact on valuation calculations
07:01 - Shiller P/E ratio and its smoothing effect
10:17 - Market cap-weighted vs. equal-weighted valuations
11:37 - Median stock valuation and its implications
13:15 - Comparing the median stock P/E to Microsoft's valuation
14:52 - Median stock valuation using forward earnings estimates
17:06 - Price-to-sales ratio and its relationship to profit margins
20:21 - What is market valuation actually good for?
23:37 - Limitations of using valuation data for short-term investment decisions
26:34 - When market valuation may be useful for long-term investors
29:30 - Arguments for and against the relevance of market valuation
31:06 - Correctly calculating the P/E ratio of a portfolio
35:02 - Valuation differences between growth and value stocks
41:57 - Sector composition and its impact on country-level valuations
43:42 - Comparing stock valuations to bond yields
46:49 - The link between valuation and expected returns
54:02 - Valuation data in financial planning: shorter-term vs. longer-term considerations
58:21 - The importance of understanding the "why" behind investment decisions
61:17 - Conclusion and key takeaways
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Пікірлер: 6

@HepCatJack Ай бұрын

At 32:54 another way to do it is to take the EPS of each holding and multiply this by the number of shares. Then take the number of each shares and multiply by their price and add them up. So you have SUM(Px x NbOfSharesx) / Sum(NbOfShares x EPS) giving you the total market cost of your portfolio divided by the total earnings of your portfolio.

@HepCatJack Ай бұрын

For the Nasdaq-100 index, in the 1990's the rules were altered to limit how much Microsoft could occupy in the index. I don't know if this rule was afterwards applied to the other super-stocks such as Amazon, Google and Apple.

@jamesmorris913 28 күн бұрын

I remember that, well..and, I was INFURIATED, then; as I am now, with them about to do that with Nvidia. If I'd wanted an actively-managed fund, I would have BOUGHT an actively-managed fund. I don't know how they get away with this, and still can call it, an "index".

@MichaeldeSousaCruz Ай бұрын

Yes, Matt!! There we go! Finally you say something star spangled awesome, “Always Pay Your Taxes!” You’ve just got to finish it off with the grand finale, “To keep our currency strong! To keep our country strong!” 🇺🇸 👏 💪

@stiffeification Ай бұрын

cringe

@jamesmorris913 28 күн бұрын

All of this hyper-analysis is MEANINGLESS. It's all about what people perceive as being the best money-making prospects. That's why a house which costs $200,000 in San Antionio, is $2,000,000 in San Francisco, for the same house.