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股市还能继续涨吗?巴菲特和弗里德曼的指标均发出警报

股市还能继续涨吗?巴菲特和弗里德曼的指标均发出警报

Shawn Tully 2020年08月03日
弗里德曼和巴菲特的判断指标密切相关,而且都基于基本经济学。

如今,华尔街的很多人都认为,尽管股市估值看起来很高,定价却仍处合理水平,应该会保持上涨。但根据上世纪最伟大的两位金融大佬米尔顿·弗里德曼和沃伦·巴菲特的判断标准,该说法并不正确。

已故货币学家弗里德曼是诺贝尔奖得主,一生从未离开学术界,巴菲特则一辈子忙着打造公司,支持未来赢家,成为有史以来最成功的投资者。两人的共同点其实比想象中的要多:弗里德曼狂热支持资本主义,巴菲特也是;两人都热爱数学,考虑过当精算师;两人都否认股市“有效”理论,认为疯狂买入和恐慌性抛售往往会推动股价飙升或暴跌,幅度远大于企业的基本面。

2006年,弗里德曼去世。在去世前不久,他曾经告诉笔者:“长期来看,股市的价值可以跟踪公司收益水平。但从短期来看,市场没有什么效率。”巴菲特对此极为同意。巴菲特最出名的就是在华尔街人们疯狂逃离时保持冷静逢低买进。

弗里德曼通过长期观察认为,股票价格往往过高或过于便宜,而巴菲特也靠价值判断斩获数十亿美元收益。更重要的是,两人都引用了最受欢迎的指标,判断市场估值严重低估还是高估。弗里德曼认为,最主要的判断标准是企业收益占GDP的比例。他告诉我,该比例因为利润飙升而出现问题时,股市点位急升并不可持续。“利润无法持续吸收更多国民收入。”弗里德曼宣称。要想实现,很长一段时间内的利润增速要超过工资、投资和GDP其他部分,弗里德曼告诉我,该状态很难一直保持。

他说,如果利润上升吞掉国家产出中异常高的部分,商业繁荣推动利润增长后最终也会拉低利润。为什么?因为刚开始销售额激增会提高利润,推动公司雇佣更多员工,为了争取员工,工资增加的同时利润率降低。

弗里德曼的言下之意是:如果利润增速远超整体经济增速,从而推动股价飙升,那就要当心了!趋势必然会逆转,冲击利润,很可能还会拖累股价。

而在巴菲特看来,判断标准是美国所有股票相对GDP的价值。正如他在2001年对《财富》杂志所言:“这可能是任何时候判断估值水平的最佳指标。”市值与国民收入的比例也通常被称为“巴菲特指标”。

弗里德曼和巴菲特的判断指标密切相关,而且都基于基本经济学。从本质上讲,这两种检测表明,在开放且竞争充分的经济体运作方式下,企业很难长时间获得巨额利润。但大品牌,还有高度监管且价格保护的行业除外,例如制药业。一般来说,如果半导体或体育器材企业不断提高价格获得丰厚利润,就会有竞争对手加入。能更好、更便宜地生产和销售同类产品的竞争对手大幅降价以赢得客户,利润率最终回落到原先的正常水平。

弗里德曼主要看重经济规律如何控制利润。巴菲特指标也关注利润,但包含了第二个组成部分,即估值或市盈率倍数。两个指标中单独一个或联合起来,都能推动标普指数市值超过GDP的水平。第一个驱动因素是利润跃升至历史高位且不可持续的水平,第二个因素则是投资者摆脱疯狂的狂热情绪。狂热中的投资者愿意为每一美元利润支付泡沫般的价格,推动市盈率飙升。又或许标普500指数的市值会因为两大因素结合而膨胀到危险水平。在疫情来袭之前的2020年年初,情况就是如此。由于价格几乎降回当初水平,人们自然质疑,如果利润没有大幅跃升,市盈率大涨或两种情况都出现,如何才能从现在开始上涨。

来看看如何利用巴菲特和弗里德曼的指标,判断应对新冠病毒大流行造成经济急剧下滑时,乐观情绪的力量多么大。7月22日周四收盘时,标普500指数报收3236点,略高于2019年年底3131点的纪录。目前该指数仅比2月19日3386点的历史高点低4.4%。如果投资者想买标普指数基金或大盘股多元化投资组合,就得相信在12或24个月内,股价会大幅上涨。鉴于当前市场跌宕起伏,基金和个人都希望能从注定艰难的后市里获得丰厚回报,更要对上涨充满信心。

先从巴菲特指标看起。指标中包含GDP和股票总价值,我们用占总价值大部分的标准普尔500指数作为代表。美国国会预算办公室预测,国民收入将从2019年四季度的年化21.729万亿美元降至二季度的19.246万亿美元和三季度的20.361万亿美元,分别下降11.4%和6.3%。国会预算办公室的预测,产量要等到2021年四季度末才可以恢复到2019年年底水平。(预测数据与2019年四季度的21.75万亿美元几乎持平。)预测的时间离现在还有18个月。保守假设是,投资者希望未来一年半里获得10%收益,或者每年6.5%收益,才能应付窘境。

我们稍后评估比例的实际效用。但首先援引一下弗里德曼的精神,认真观察利润。利润水平要达到多高,才能18个月里将股市点位提升到3560,利润达到该水平的几率多大?为了进一步探讨,我将介绍新的参与者,也就是本文作者。尽管他对加入这家权威公司有些敬畏,还是增加了自己的标准。新标准被称为“Tully 20规则”。该标准假定,一旦经济回到正轨,标普500指数的合理市盈率为20倍。虽然低于过去20年的水平,但还是远远高于60年来17倍市盈率的平均水平。

如果市盈率为20倍,标普上市公司每股收益要达到178美元,指数才能涨到3560点,而且未来18个月内实现10%的回报率。这比2019年年底139.47美元的纪录还高出28%。

请记住,标普的利润暴跌来得太快,接受标普调查的华尔街分析师预测,2020年全年每股收益将降至93美元,较2019年年底139.47美元的纪录下跌33%。分析师进一步预计,到2021年年底,也就是国会预算办公室预测国民收入恢复到2019年年末水平时,每股收益才能达到147美元,略高于两年前140美元左右的关口。

多头认为18个月内达到3560点很容易,如果要实现,标普每股收益要比向来以乐观著称的分析师预测数字还要高出21%。然而,达到该数字并没有那么容易,连弗里德曼都会失望。而一旦达到,标普总收益占GDP比例将达到6.7%。2019年年底,按历史标准来看每股收益占GDP的比例已然很高,达到5.3%。2007年7月金融危机爆发前,该比例为5.5%;2000年年中的科技泡沫中,该比例为4.3%。所以现在不能考虑“收益变成大救星”的情景。指望2022年利润比2019年末的好光景高出近30%,股价也远远超过之前狂热时期,只能是幻想。这是不会发生的。

很明显,在预期市盈率达到20倍时,标普500指数不会达到3560点。靠收益水平提振做不到。理论上,标普可以比现在涨10%,但前提是未来市盈率远高于我们假设的20倍。可以肯定的是,由于本轮深度衰退中每股收益大幅下降,业绩要达到史诗般辉煌才能实现。如果收益反弹至2019年四季度创下的历史新高,即近140美元,市盈率升至25.4(3560除以140美元),标普指数有望达到预期。但市盈率水平要比我们认为合理的20倍高出27%。过去十年里,任一季度里标普指数市盈率都没有达到如此高的水平,而同期内市盈率水平平均下跌了16%,为21倍,已经远高于历史标准。

当然,理论上每股收益可能飙升至178美元,市盈率可能会攀升至25倍以上,或者高每股收益和高市盈率出现某种组合,推动未来18个月内标普指数上涨10%。关键还是看巴菲特指标。任何情况下目标都一样,标普指数达到3560点,总价值与国民收入比例达到135%。根据巴菲特指数,出现该情况的可能性极低。

原因何在?因为标普与GDP之比达到135%,将会史无前例。如果真出现这种情况,将代表一种新常态,非常不正常。2007年年中的大牛市时期,标普价值占GDP的97%。近几十年来最高比例为123%,出现过两次:一次是在2000年6月科技泡沫崩溃前的高点,另一次则是2019年年底。而1975年以来的平均水平是90%左右。

回过头来看多位华尔街人士鼓吹的标普指数仍有很大上升空间一说,与巴菲特指标和弗里德曼的收益率占GDP比例都不吻合。用两个标准检测都通不过。更靠谱的猜测是:18个月内利润可以回到2019年年末的139美元水平,市盈率达到20倍。指数水平为2780点,比当前水平低14%,比起收益率10%的3560点位则低22%。所以别偏信“美联储看跌”,大型科技股势不可挡,还有场外现金充沛了,别以为“这次不一样”。不如笃定跟随两位大佬热爱的标准,一条仍然在应用,一条已经使用多年,但两条发出了同样的信号,秋后算账已不远。(财富中文网)

译者:Feb

如今,华尔街的很多人都认为,尽管股市估值看起来很高,定价却仍处合理水平,应该会保持上涨。但根据上世纪最伟大的两位金融大佬米尔顿·弗里德曼和沃伦·巴菲特的判断标准,该说法并不正确。

已故货币学家弗里德曼是诺贝尔奖得主,一生从未离开学术界,巴菲特则一辈子忙着打造公司,支持未来赢家,成为有史以来最成功的投资者。两人的共同点其实比想象中的要多:弗里德曼狂热支持资本主义,巴菲特也是;两人都热爱数学,考虑过当精算师;两人都否认股市“有效”理论,认为疯狂买入和恐慌性抛售往往会推动股价飙升或暴跌,幅度远大于企业的基本面。

2006年,弗里德曼去世。在去世前不久,他曾经告诉笔者:“长期来看,股市的价值可以跟踪公司收益水平。但从短期来看,市场没有什么效率。”巴菲特对此极为同意。巴菲特最出名的就是在华尔街人们疯狂逃离时保持冷静逢低买进。

弗里德曼通过长期观察认为,股票价格往往过高或过于便宜,而巴菲特也靠价值判断斩获数十亿美元收益。更重要的是,两人都引用了最受欢迎的指标,判断市场估值严重低估还是高估。弗里德曼认为,最主要的判断标准是企业收益占GDP的比例。他告诉我,该比例因为利润飙升而出现问题时,股市点位急升并不可持续。“利润无法持续吸收更多国民收入。”弗里德曼宣称。要想实现,很长一段时间内的利润增速要超过工资、投资和GDP其他部分,弗里德曼告诉我,该状态很难一直保持。

他说,如果利润上升吞掉国家产出中异常高的部分,商业繁荣推动利润增长后最终也会拉低利润。为什么?因为刚开始销售额激增会提高利润,推动公司雇佣更多员工,为了争取员工,工资增加的同时利润率降低。

弗里德曼的言下之意是:如果利润增速远超整体经济增速,从而推动股价飙升,那就要当心了!趋势必然会逆转,冲击利润,很可能还会拖累股价。

而在巴菲特看来,判断标准是美国所有股票相对GDP的价值。正如他在2001年对《财富》杂志所言:“这可能是任何时候判断估值水平的最佳指标。”市值与国民收入的比例也通常被称为“巴菲特指标”。

弗里德曼和巴菲特的判断指标密切相关,而且都基于基本经济学。从本质上讲,这两种检测表明,在开放且竞争充分的经济体运作方式下,企业很难长时间获得巨额利润。但大品牌,还有高度监管且价格保护的行业除外,例如制药业。一般来说,如果半导体或体育器材企业不断提高价格获得丰厚利润,就会有竞争对手加入。能更好、更便宜地生产和销售同类产品的竞争对手大幅降价以赢得客户,利润率最终回落到原先的正常水平。

弗里德曼主要看重经济规律如何控制利润。巴菲特指标也关注利润,但包含了第二个组成部分,即估值或市盈率倍数。两个指标中单独一个或联合起来,都能推动标普指数市值超过GDP的水平。第一个驱动因素是利润跃升至历史高位且不可持续的水平,第二个因素则是投资者摆脱疯狂的狂热情绪。狂热中的投资者愿意为每一美元利润支付泡沫般的价格,推动市盈率飙升。又或许标普500指数的市值会因为两大因素结合而膨胀到危险水平。在疫情来袭之前的2020年年初,情况就是如此。由于价格几乎降回当初水平,人们自然质疑,如果利润没有大幅跃升,市盈率大涨或两种情况都出现,如何才能从现在开始上涨。

来看看如何利用巴菲特和弗里德曼的指标,判断应对新冠病毒大流行造成经济急剧下滑时,乐观情绪的力量多么大。7月22日周四收盘时,标普500指数报收3236点,略高于2019年年底3131点的纪录。目前该指数仅比2月19日3386点的历史高点低4.4%。如果投资者想买标普指数基金或大盘股多元化投资组合,就得相信在12或24个月内,股价会大幅上涨。鉴于当前市场跌宕起伏,基金和个人都希望能从注定艰难的后市里获得丰厚回报,更要对上涨充满信心。

先从巴菲特指标看起。指标中包含GDP和股票总价值,我们用占总价值大部分的标准普尔500指数作为代表。美国国会预算办公室预测,国民收入将从2019年四季度的年化21.729万亿美元降至二季度的19.246万亿美元和三季度的20.361万亿美元,分别下降11.4%和6.3%。国会预算办公室的预测,产量要等到2021年四季度末才可以恢复到2019年年底水平。(预测数据与2019年四季度的21.75万亿美元几乎持平。)预测的时间离现在还有18个月。保守假设是,投资者希望未来一年半里获得10%收益,或者每年6.5%收益,才能应付窘境。

我们稍后评估比例的实际效用。但首先援引一下弗里德曼的精神,认真观察利润。利润水平要达到多高,才能18个月里将股市点位提升到3560,利润达到该水平的几率多大?为了进一步探讨,我将介绍新的参与者,也就是本文作者。尽管他对加入这家权威公司有些敬畏,还是增加了自己的标准。新标准被称为“Tully 20规则”。该标准假定,一旦经济回到正轨,标普500指数的合理市盈率为20倍。虽然低于过去20年的水平,但还是远远高于60年来17倍市盈率的平均水平。

如果市盈率为20倍,标普上市公司每股收益要达到178美元,指数才能涨到3560点,而且未来18个月内实现10%的回报率。这比2019年年底139.47美元的纪录还高出28%。

请记住,标普的利润暴跌来得太快,接受标普调查的华尔街分析师预测,2020年全年每股收益将降至93美元,较2019年年底139.47美元的纪录下跌33%。分析师进一步预计,到2021年年底,也就是国会预算办公室预测国民收入恢复到2019年年末水平时,每股收益才能达到147美元,略高于两年前140美元左右的关口。

多头认为18个月内达到3560点很容易,如果要实现,标普每股收益要比向来以乐观著称的分析师预测数字还要高出21%。然而,达到该数字并没有那么容易,连弗里德曼都会失望。而一旦达到,标普总收益占GDP比例将达到6.7%。2019年年底,按历史标准来看每股收益占GDP的比例已然很高,达到5.3%。2007年7月金融危机爆发前,该比例为5.5%;2000年年中的科技泡沫中,该比例为4.3%。所以现在不能考虑“收益变成大救星”的情景。指望2022年利润比2019年末的好光景高出近30%,股价也远远超过之前狂热时期,只能是幻想。这是不会发生的。

很明显,在预期市盈率达到20倍时,标普500指数不会达到3560点。靠收益水平提振做不到。理论上,标普可以比现在涨10%,但前提是未来市盈率远高于我们假设的20倍。可以肯定的是,由于本轮深度衰退中每股收益大幅下降,业绩要达到史诗般辉煌才能实现。如果收益反弹至2019年四季度创下的历史新高,即近140美元,市盈率升至25.4(3560除以140美元),标普指数有望达到预期。但市盈率水平要比我们认为合理的20倍高出27%。过去十年里,任一季度里标普指数市盈率都没有达到如此高的水平,而同期内市盈率水平平均下跌了16%,为21倍,已经远高于历史标准。

当然,理论上每股收益可能飙升至178美元,市盈率可能会攀升至25倍以上,或者高每股收益和高市盈率出现某种组合,推动未来18个月内标普指数上涨10%。关键还是看巴菲特指标。任何情况下目标都一样,标普指数达到3560点,总价值与国民收入比例达到135%。根据巴菲特指数,出现该情况的可能性极低。

原因何在?因为标普与GDP之比达到135%,将会史无前例。如果真出现这种情况,将代表一种新常态,非常不正常。2007年年中的大牛市时期,标普价值占GDP的97%。近几十年来最高比例为123%,出现过两次:一次是在2000年6月科技泡沫崩溃前的高点,另一次则是2019年年底。而1975年以来的平均水平是90%左右。

回过头来看多位华尔街人士鼓吹的标普指数仍有很大上升空间一说,与巴菲特指标和弗里德曼的收益率占GDP比例都不吻合。用两个标准检测都通不过。更靠谱的猜测是:18个月内利润可以回到2019年年末的139美元水平,市盈率达到20倍。指数水平为2780点,比当前水平低14%,比起收益率10%的3560点位则低22%。所以别偏信“美联储看跌”,大型科技股势不可挡,还有场外现金充沛了,别以为“这次不一样”。不如笃定跟随两位大佬热爱的标准,一条仍然在应用,一条已经使用多年,但两条发出了同样的信号,秋后算账已不远。(财富中文网)

译者:Feb

Many on Wall Street are pushing the view that despite what looks like super-rich valuations, the stock market is fairly priced and should rise from here. But that scenario flunks a pair of tests favored by two of the greatest financial minds of the past century: Milton Friedman and Warren Buffett.

Friedman, the late Nobel Prize–winning monetarist who never left academia, and Buffett, who spent his entire career in the arena building companies and backing future winners en route to becoming the most successful investor of all time, have more in common than you might think. Friedman was an ardent champion of capitalism and so is Buffett; both loved math and considered becoming actuaries; and each has rejected the theory that the stock market is "efficient," insisting that buying frenzies and panic selloffs often send prices soaring far above, or cascading well below, the enterprises' fundamental values.

Shortly before his passing in 2006, Friedman told this writer, "Over long periods, the stock market's value does track companies' earnings. But in the short term, the market is far from efficient." Buffett couldn't agree more. He's famous for staying calm and scooping up bargains in tough times when the Wall Street crowd is fleeing in a stampede.

Friedman believed from long observation, and Buffett reaped billions betting, that equities are often excessively pricey or overly cheap. What's more, both cited favorite metrics that measure when markets are drastically under- or overvalued. For Friedman, the ruling measure was corporate earnings as a share of GDP. When that ratio went out of whack because profits spiked, he told me, the jump was unsustainable. "Profits can't keep absorbing more and more of national income," declared Friedman. For that to happen, they'd need to outgrow wages, investment, and other GDP components for long periods, a dynamic that Friedman told me couldn't last.

If profits rose to devour an unusually high portion of the nation's output, he said, the boom in business that pushed them up would eventually push them back down. Why? Because the surge in sales that initially raised profits would force companies to hire additional workers, and the competition for those workers would raise payrolls and depress margins.

By implication, Friedman was saying that if stock prices soar because earnings are racing far faster than the overall economy, watch out! The trend is bound to reverse, pounding profits and, in all probability, dragging down equity prices.

For Buffett, the yardstick is the value of all U.S. equities compared to GDP. As he told Fortune in 2001, "It's probably the best single measure of where valuations stand at any single moment." The market cap to national income metric is often called "the Buffett Indicator."

The Friedman and Buffett measures are closely related, and both are based on bedrock economics. Essentially, the two tests are saying that the very workings of an open, competitive economy make it extremely difficult for companies to generate outsize profits for long periods—with exceptions for great brands and highly regulated, price-protected sectors such as pharmaceuticals. In general, when a company keeps raising prices and garnering fat margins on semiconductors or sports equipment, those rich profits are a magnet for competitors to jump in. Rivals that can make and sell the same stuff better and cheaper slash prices to win customers, and margins eventually retreat to their historic benchmarks.

Friedman is talking specifically about how economic gravity governs profits. The Buffett metric also looks at earnings but encompasses a second component, valuation or price/earnings multiples. Either one of them operating separately, or the pair in tandem, can swell the S&P's value to excessive levels of GDP. The first driver is a jump in earnings to historically lofty, unsustainable levels. The second is the lift from crazy ebullience that causes investors to pay bubble-like prices for each dollar of profits, sending P/Es soaring. Or the S&P 500's market cap can get dangerously inflated by a combination of the two. That was the case in early 2020 before the pandemic struck. Since prices are nearly back to those levels, it's natural to question how they can advance from here without a huge jump in profits, an outsize P/E that flashes red, or the two working together.

Let's examine what the Buffett and Friedman measures are telling us about the remarkable exuberance that's defying the steep economic downturn caused by the COVID-19 pandemic. At the close on Thursday, July 22, the S&P 500 stood at 3236, a shade above its near record of 3131 at the end of 2019. The index now sits just 4.4% below its all-time high of 3386 on Feb. 19. To buy an S&P index fund or a diversified portfolio of large-caps, investors must believe they'll be a lot higher in 12 or 24 months. That's especially true since the markets been careening through lurching swings, so that funds and individuals want to be well rewarded for what promises to remain a rough ride.

Let's start by deploying the Buffett Indicator. It incorporates both GDP and aggregate value of equities, for which we'll use the S&P 500, accounting for most of that total, as a proxy. The Congressional Budget Office projects that national income will tank from an annualized $21.729 trillion in Q4 2019, to $19.246 trillion in Q2 and $20.361 in Q3, drops of 11.4% and 6.3% respectively. In the CBO's forecast, output doesn't return to year-end 2019 levels until the end of Q4 2021. (Its figure for that quarter is virtually flat, with Q4 2019 at $21.75 trillion.) That's around 18 months from now. It's conservative to assume that investors would want a 10% gain over that year-and-a-half, or 6.5% on an annual basis, to brave the rapids.

We'll get to assessing that ratio in a minute. But first let's invoke the spirit of Friedman and look at earnings. What level of profits are needed to boost the market to 3560 in 18 months, and what are the chances they can get that big? To explore that question, I'll introduce a new participant, the author, who, though awed to join this august company, adds his own measure. It's called the "Tully 20 Rule." That yardstick posits that 20 is a reasonable price/earnings multiple to project for the S&P 500 once the economy gets back on track. It's lower than the level of the past 20 years, but much higher than the 60-year average of under 17.

At a 20 P/E, the S&P companies would need to earn $178 a share to achieve the 3560 mark that would deliver a 10% return over the next 18 months. That's 28% higher than the record of $139.47 achieved at the close of 2019.

Keep in mind that S&P profits have collapsed so fast that the Wall Street analysts polled by S&P forecast that for all of 2020, earnings per share will hit $93, a drop of 33% from their record of $139.47 the end of 2019. The analysts further expect that by the close of 2021, when the CBO predicts that national income returns to late 2019 levels, EPS will reach $147, just above the roughly $140 mark of two years before.

To get to 3560 in 18 months, a rise the bulls view as a gimme, the S&P would need to generate 21% higher EPS than even the analysts, who are notoriously optimistic, are forecasting. Here's the killer and the figure that would dismay Friedman. Total S&P earnings as a share of GDP would have to hit 6.7%. At the end of 2019, EPS as a share of GDP was already high by historical standards at 5.3%. In the run-up to the Great Financial Crisis in July 2007, that ratio was 5.5%; in the tech bubble of mid-2000, the number was 4.3%. We'll dismiss the "earnings will ride to the rescue" scenario right now. The notion that profits will be almost 30% bigger heading into 2022 than in the great times of late 2019, and also far surpass the shares in previous frenzies, is a fantasy. It won't happen.

It's clear that the S&P won't come close to hitting 3560 at our projected P/E of 20. Earnings can't do the job. In theory the S&P could deliver a 10% gain from here—but only if the future P/E is far higher than our assumption of 20. To be sure, that would require an epic performance, considering how far EPS has fallen in this deep recession. If earnings rebound to nearly $140, their all-time high posted in Q4 2019, the S&P would ring the bell if the P/E ratio went to 25.4 (3560 divided by $140). That's 27% above what we consider a reasonable projection of 20. The S&P has never posted a multiple that high for a single quarter in the past decade, and the average over that span is 16% lower at 21, a figure that's already well above the historic norm.

Of course, it's theoretically possible that the EPS could jump to $178, or that the P/E could climb to 25-plus, or that some combination of high EPS and an elevated P/E could lift the S&P by 10% over the next 18 months. The clincher is the Buffett Indicator. In any of those cases, the destination is the same, an S&P at 3560 that brings its value versus national income to 135%. The Buffett Indicator rates the probability that will happen as extremely low.

Why? Because a S&P to GDP of 135% is wildly out of line with almost any past precedent. It would represent a new normal that's too abnormal to happen. In the mid-2007 boom, the S&P's value stood at 97% of GDP. The highest figure notched in recent decades was 123%, registered twice, once at summit preceding the tech meltdown in June of 2000, and again at the end of 2019. The average since 1975 is around 90%.

The scenario that many on Wall Street are selling, that the S&P has plenty of room to rise from here, runs headlong into both the Buffett Indicator and the Friedman earnings-to-GDP metric. It gets an F on both tests. A better bet is that profits return to something like their late 2019 level of $139 in 18 months and garner a 20 P/E. That would put the index at 2780, 14% below where it is today, and 22% under the 3560 S&P level that would provide a 10% gain from here. Forget the "this time it’s different" story about "the Fed put," unstoppable momentum in big tech, and hoards of cash on the sidelines. Believe the measures preferred by the two sages, one still with us, one for the ages, that are flashing the same signal that a reckoning is coming.

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