Stock Market Valuations and Hamburgers

Stock Market Valuations and Hamburgers
Valuations and Forward Equity Market Returns
Earnings Estimates
Bull Markets Go Out with a Bang
What Will Trigger the Next Bear Market?
Some Final Thoughts from John
Augusta GA, the Masters, and Tampa Bay
‘To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying — – except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.’
– Warren Buffett, Fortune magazine: ‘The Wit and Wisdom of Warren Buffett’
A few weeks ago I spent two days giving multiple speeches alongside my friend Steve Blumenthal of CMG in a very cold New Jersey on the heels of a rather strong blizzard that had left the countryside white and beautiful. I listened to Steve do deep dives on stock market valuations. He started each of his presentations with Warren Buffett’s hamburger story, quoted above, before jumping into multiple charts. After a while, we began to go back and forth during his presentations, as I had my own insights on market valuations, generally in sync with his.
I asked him if he would be willing to do a joint letter on valuations from time to time (as he puts a great deal of research into the topic), and he agreed. This will be the first of our occasional joint letters (assuming we get a good response), with Steve doing the first draft and then me jumping in with comments and charts from my own sources. I want to thank the Ned Davis Research team for allowing us to use a few of their charts and data. (I should note that Steve will be at my conference, for those attendees who would like to talk with him further on this topic.) So let’s jump right in.

This post was published at Mauldin Economics on APRIL 9, 2017.