Tags: Ken Fisher | Stocks | Overvalued | Buying

Money Manager Ken Fisher: Stocks Aren't Overvalued — So Keep Buying

Money Manager Ken Fisher: Stocks Aren't Overvalued — So Keep Buying
(Dollar Photo Club)

By    |   Wednesday, 22 March 2017 08:16 AM

Investment analyst Ken Fisher advises savvy investors to ignore any naysayers and to continue to buy stocks because thinks bull market will continue to charge higher.

Some pundits “still claim stocks are overvalued — that buying now, with markets high and price/earnings ratios stretched, is for speculators only. Normal investors should wait for stocks to fall, they say,” the founder and chairman of Fisher Investments wrote for the Financial Times.

“This is backwards. It presumes that long-term investors need solid reasons to own stocks. Yet if you need long-term growth, your default asset allocation should be stock-heavy. No other liquid asset has approached stocks’ 10 percent annualized return since 1926, which includes 13 bear markets. Enduring bears doesn’t destroy you, provided you capture all the bull markets,” he wrote.

“Stocks aren’t overvalued. Valuation techniques are. Particularly the ever-popular CAPE, or cyclically adjusted price to earnings ratio, which divides the market’s price by the last 10 years’ inflation-adjusted earnings,” he said.

Fisher is referring to the cyclically adjusted price-to-earnings ratio, commonly known as CAPE, the Shiller P/E (after co-founder Yale Economist and Nobel laureate Robert Shiller), or P/E 10 ratio. CAPE is a valuation measure usually applied to the US S&P 500 equity market. It is defined as price divided by the average of ten years of earnings (moving average), adjusted for inflation.

“Think back to 1996: would you have stayed out knowing overall returns through 2006 were low if you also knew stocks would soar through March 2000 and have good years after the 2000-2002 bear market? I doubt it,” he said.

“Tune out CAPE. Precious few fear a real peak — they’ll then think stocks will soar forever. The masses will explain why p/e ratios aren’t high enough, not fear that they are too lofty. Fear of heights is bullish. So buy now,” he said.

Newsmax Finance Insider Lance Roberts also recent took the CAPE to task.

"But the debate over the value, and current validity, of the Shiller’s CAPE ratio, is not new. Critics argue that the earnings component of CAPE is just too low, changes to accounting rules have suppressed earnings, and the financial crisis changed everything," Roberts wrote for Newsmax Finance.

"This was a point made by Wade Slome previously:

“If something sounds like BS, looks like BS, and smells like BS, there’s a good chance you’re probably eyeball-deep in BS. In the investment world, I encounter a lot of very intelligent analysis, but at the same time I also continually step into piles of investment BS. One of those piles of BS I repeatedly step into is the CAPE ratio (Cyclically Adjusted Price-to-Earnings) created by Robert Shiller.”

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Investment analyst Ken Fisher advises savvy investors to ignore any naysayers and to continue to buy stocks because thinks bull market will continue to charge higher.Some pundits "still claim stocks are overvalued - that buying now, with markets high and price/earnings...
Ken Fisher, Stocks, Overvalued, Buying
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2017-16-22
Wednesday, 22 March 2017 08:16 AM
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