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Tobin’s Q-Ratio Trades at Historical Highs
By just about any intrinsic measure – the stock market looks expensive. Ben Graham would be warning investors to heed caution. Now one of the more widely cited metrics is its forward price-to-earnings (PE) ratio – which trades at a very high 22x. However, another intrinsic measure is James Tobin’s Q-Ratio – which now trades at a record high – exceeding that of the dot.com bust. And whilst not a great timing tool – it maintains a very reliable record of picking long-term secular highs.
Tariffs: More than Just Trade Imbalances
Since Trump’s election win – it’s clear he’s willing to use access to (lucrative) U.S. markets as leverage to achieve broader objectives. And major trading partners are taking notice. For e.g., the ECB’s Chief – Christine Lagarde – has suggested European countries should look at how to avoid (new) tariffs by buying more US made goods. And South Korea is looking at buying more US based LNG. What’s clear is any potential tariffs are becoming an integral part of a larger strategy to reorient global trade relations around issues such as greater security, immigration and health priorities. That is, they’re not exclusively aimed at reducing economic imbalances.
Benjamin Graham’s ‘The Intelligent Investor’
Over the 14 years writing this blog – I’ve mentored many people on how to become a better investor. It’s something I enjoy and a large part of why I’ve written this blog for so long. As part of that, one of the (many) books I highly recommend is Benjamin Graham’s timeless classic “The Intelligent Investor”. Unfortunately this is not a great book for those beginning their investing career. It’s very dense and requires a lot of time and focus. I had the idea to write a 20-part summary of the book — where each part corresponds to a chapter. And where practical – I produced up-to-date examples of his principles – simply to illustrate that nothing changes. And whilst someone will always say “it’s different this time” – the truth is very rarely is it different.
Here Come the Foolish Forecasts
Once again, it’s that time of year. Investment houses are set to release their forecasts for the upcoming year. Why they bother I don’t know? And whilst there is still approx one month to go – if the markets finish anywhere near 5,800 – most forecasts made for 2024 will be abysmal. The average end-of-year forecast for 2024 was ~4600. The closest looks like being Ed Yardeni – who forecast 5400 – however at the time appeared wildly bullish. Well done Ed.J.P. Morgan told their clients we would finish 2024 around 4200 – currently more than 40% off the mark…. could it get any worse? So what do you think they will tell us for 2025? My guess “up in the realm of ~8%”. Why? Because that’s the 100-year average.
For a full list of posts from 2017…