Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Stock Market Could Be Starting the Best Three-Year Run We've Ever Seen
TMO ^ | 3-4-2013 | Dr. Steve Sjuggerud

Posted on 03/04/2013 10:58:40 AM PST by blam

Stock Market Could Be Starting the Best Three-Year Run We've Ever Seen

Stock-Markets / Stocks Bull Market
March 04, 2013 - 02:28 PM GMT
By: DailyWealth
Dr. Steve Sjuggerud

Dr. Steve Sjuggerud writes: I believe the stock market could rise 95% in the next three years. But if you position yourself correctly, you could make much more than that...

This isn't just hopeful thinking on my part. It's based on rational thought... backed up by a mountain of data and experience from my lifetime of investing.

I could be wrong, of course. Stocks might not go up as I expect. But even if I'm only half-right, you'll still make nearly 50% on your money. Isn't that worth it?

Right now, several incredible forces are working together to push stock prices higher. Over the next three days, I'm going to show you each one. Today, we'll start with something you might not believe...

U.S. stocks are the best value they've ever been during my investing lifetime.

The upside potential in U.S. stocks over the next three years could be the biggest in my near-20-year career. And all stocks have to do is return to their average.

In short, stocks are 49% below fair value, based on a simple historical measure. This means your upside potential is enormous.

Let me explain...

The most common measure of a stock's value – whether the market is cheap or expensive – is the price-to-earnings (P/E) ratio.

It is easy to understand. For example, say you're looking to buy a $150,000 investment property that pays you a net rent of $10,000 a year. You're buying that property at a P/E ratio of 15 – the price (P) divided by the net rent or earnings (E).

Since 1950, the stock market's average P/E ratio has been 17.8. A couple points above that level is traditionally considered expensive. And a few points below that is traditionally considered cheap.

That's the simple, conventional wisdom. But it's a bit too simple...

Let's add one wrinkle to this math... because it helps show just how incredible the opportunity is today.

What most people don't know is there is a strong relationship between P/E ratios and interest rates... The numbers are downright crazy. And with interest rates at zero today, these numbers REALLY work in our favor...

This table shows what I mean:

You see, when short-term interest rates are punishingly high – above 6% – the average P/E ratio of stocks is low... It's only 12.

But when short-term interest rates are low – below 2.5% – the average P/E ratio of stocks is high. It's 21.8.

Judging by this table, what should the stock market's P/E ratio be? Today, we have the lowest rates in history – well below 2.5%. Where is fair value for stocks here? What is the right price to pay for a business when interest rates are this low?

Recently, superinvestor Warren Buffett gave us a clue... His Berkshire Hathaway holding company bought food-processing giant H.J. Heinz. He paid 23 times earnings for it (in other words, a P/E of 23). The world's greatest investor wouldn't have bought it if he didn't think it was a good deal.

Based on evidence of the last 60 years, the stock market's P/E ratio should be at least 21.8.

The crazy part is, we are nowhere near that number now. And when you look ahead, we are far below that number...

Right now, the stock market is trading at a P/E ratio of 17.5. But the horizon we're looking at is three years from today... when 2015 will be "in the books." Looking out to year-end 2015, based on analyst estimates, we are currently trading at a P/E ratio of 11.2.

This is the best value I've ever seen.

Remember, we're looking at 95% gains just to get back to historical fair value. Stocks have room to double from here. Invest accordingly.


TOPICS: Business/Economy; News/Current Events
KEYWORDS: economy; markets; recovery; stocks

1 posted on 03/04/2013 10:58:50 AM PST by blam
[ Post Reply | Private Reply | View Replies]

To: blam

Or not.


2 posted on 03/04/2013 11:00:05 AM PST by martin_fierro (< |:)~)
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam
Posted earlier today:

STOCK MARKET BOOM: Here's Why This Bull Market Could Continue For Years

3 posted on 03/04/2013 11:01:17 AM PST by blam
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam
Posted earlier today:

STOCK MARKET BOOM: Here's Why This Bull Market Could Continue For Years

4 posted on 03/04/2013 11:02:22 AM PST by blam
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam

Do you actually believe this? DOW getting up to somewhere around 20,000? I mean this is patently foolish. We’ve just now come to gaining back losses in the DOW since 2008 when it was at its high then. Imagine...5 years to make back what you had...that’s some real value fella!

And, this is with the US Government printing up billions of dollars each month buying up STOCKS and BONDS to prop up the imaginary healthy picture. You go buy a buttload of stocks now...I’m SURE you’ll reap the rewards....


5 posted on 03/04/2013 11:02:41 AM PST by Gaffer
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam

you really think they’re gonna let that happen? there was a story in the times this morning decrying high corporate profits and a rallying market while job creation is listless and household income is down.

I took that to be the first salvo in a broader attack on “the rich”, which will soon turn out to be most of us — not because we many of us are going to genuinely get rich, but because the obamites will define it down.


6 posted on 03/04/2013 11:04:13 AM PST by JohnBrowdie (http://forum.stink-eye.net)
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam

I could spend 30 minutes on google and post a story telling us be prepared for the greatest boom in history, be prepareed for the greatest crash in history, be prepared for 20 years of a flat market, and every shade of prediction in between.

What would the point of that be?


7 posted on 03/04/2013 11:05:59 AM PST by DManA
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam

IMO, inflation is a big driver behind recent market gains as well.


8 posted on 03/04/2013 11:06:43 AM PST by IamConservative (The soul of my lifes journey is Liberty!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam

I could be wrong, of course.

No shit Sherlock !


9 posted on 03/04/2013 11:06:45 AM PST by AngelesCrestHighway
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam

If this happens then it will not be in real terms. It will be based on a major decline in the value of the dollar because of all the “money printing” and the unsustainable debt. The real economy will be tanking while the market climbs. Inflation will be through the roof.

Of course this whole scenario is just one of several that could play out. But none of them are good.


10 posted on 03/04/2013 11:08:14 AM PST by Revel
[ Post Reply | Private Reply | To 3 | View Replies]

To: DManA

I remember the last McGloughlin Group before the Millenium. Pat Buchanan predicted the DOW would hit 15,000 in 2000. Or not....


11 posted on 03/04/2013 11:09:26 AM PST by massgopguy (I owe everything to George Bailey)
[ Post Reply | Private Reply | To 7 | View Replies]

To: blam

And just how are stocks going to the moon when the boy socialist is taking all that money that could be invested and flushing it for big government? Get real!


12 posted on 03/04/2013 11:10:32 AM PST by AngelesCrestHighway
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam

The more they prop this stock market up the harder it’s going to collapse. And it will collapse.


13 posted on 03/04/2013 11:11:56 AM PST by ryan71
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam

Obama Won’t Finish his Second Term Without the Bottom Dropping Out.

Peter Schiff

” Investors are oblivious ...USD collapse...spike in interest rates...economic foundation of cheap money collapses...obama won`t finish his second term without the bottom dropping out.”

http://www.youtube.com/watch?v=JSWzgIBU5v0

.


14 posted on 03/04/2013 11:14:06 AM PST by Para-Ord.45
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam
With the Federal Reserve printing $$$ and propping up the stock market, sure!

 photo bernanke_zps1e8dd06f.png

15 posted on 03/04/2013 11:14:09 AM PST by ConjunctionJunction
[ Post Reply | Private Reply | To 1 | View Replies]

To: JohnBrowdie
You really think they’re gonna let that happen? there was a story in the times this morning decrying high corporate profits and a rallying market while job creation is listless and household income is down."

12 Things That Just Happened That Show The Next Wave Of The Economic Collapse Is Almost Here

16 posted on 03/04/2013 11:19:05 AM PST by blam
[ Post Reply | Private Reply | To 6 | View Replies]

To: Revolting cat!

“Boosh’s fault!!!”


17 posted on 03/04/2013 11:19:57 AM PST by a fool in paradise (America 2013 - STUCK ON STUPID)
[ Post Reply | Private Reply | To 1 | View Replies]

To: martin_fierro

Oh, sure, it could “run up” for the next few years in “dollars” until those running it up are ready for their big exit, or the dollar ceases to have any value whatsoever.


18 posted on 03/04/2013 11:20:59 AM PST by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
[ Post Reply | Private Reply | To 2 | View Replies]

To: blam

Bullshit! The stock market is being artifically proped up by the obama administration.


19 posted on 03/04/2013 11:23:42 AM PST by sport
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam

“I could be wrong, of course”. Nice of him to add that.


20 posted on 03/04/2013 11:26:37 AM PST by ozzymandus
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam
Based on evidence of the last 60 years, the stock market's P/E ratio should be at least 21.8.

Problem is, the "E" part is often pure accounting fiction these days, so the market's real P/E could be more like 100.

21 posted on 03/04/2013 11:31:38 AM PST by Mr. Jeeves (CTRL-GALT-DELETE)
[ Post Reply | Private Reply | To 1 | View Replies]

To: ConjunctionJunction

Indeed when the Federal Reserve stops printing $$$ it will look like 1929 two folld.


22 posted on 03/04/2013 11:32:37 AM PST by Vaduz
[ Post Reply | Private Reply | To 15 | View Replies]

To: blam

Steve Sjuggerud has not just swilled down gallons of the purple Kool-Aid. He’s swimming in a tank of it and absorbing it through his skin.


23 posted on 03/04/2013 11:39:00 AM PST by WashingtonSource
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam

In the game of economic prognostication I am firmly entrenched in the glass half empty mindset. Good luck with the guess to whoever wrote this...


24 posted on 03/04/2013 11:40:15 AM PST by BreezyDog (Illegitimi non carborundum)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Gaffer

Of course the dow will rise just on inflation over time.


25 posted on 03/04/2013 11:40:33 AM PST by Andrei Bulba (No Obama, no way)
[ Post Reply | Private Reply | To 5 | View Replies]

To: Andrei Bulba

Current ~14,000 to 20,000 is 6,000 rise....6/14 +42% Definitely not inflation. If it is we gots bigger problems.


26 posted on 03/04/2013 11:46:25 AM PST by Gaffer
[ Post Reply | Private Reply | To 25 | View Replies]

To: blam

of course it could. Zimbabwe’s skyrocketed during hyperinflation, I guess it could happen here too


27 posted on 03/04/2013 11:50:32 AM PST by GeronL (http://asspos.blogspot.com)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Andrei Bulba
Of course the dow will rise just on inflation over time.

So true. I read statements that the dow should be over 20,000 plus except we are in bad times. It's rising with inflation but not where it should be. They're keeping interest rates low just so the service interest on the debt is same amount it was many years ago - which is less than what the service interest should be if inflation was taken into account. Interest rates can't go lower than zero, so this whole thing is going to blow up soon. Then the service interest on debt will crash it all, with hyperinflation. Fun times.

28 posted on 03/04/2013 12:11:53 PM PST by roadcat
[ Post Reply | Private Reply | To 25 | View Replies]

To: blam

OR....... it could crash......


29 posted on 03/04/2013 12:14:29 PM PST by hosepipe (This propaganda has been edited to include some fully orbed hyperbole..)
[ Post Reply | Private Reply | To 1 | View Replies]

To: hosepipe

http://www.afailureofcivility.com/


30 posted on 03/04/2013 12:15:49 PM PST by hosepipe (This propaganda has been edited to include some fully orbed hyperbole..)
[ Post Reply | Private Reply | To 29 | View Replies]

To: hosepipe
Save the article.
In a year or so, it will be the joke of the year for 2013.
If you understand, you can predict, and his small, fig leaf disclaimer of his prediction, will be ignored when the 20,000 Dow ,2013 inflation adjusted, does not come to pass.
TWB
31 posted on 03/04/2013 12:24:35 PM PST by TWhiteBear (Sarah Palin...The Flame of the North)
[ Post Reply | Private Reply | To 29 | View Replies]

To: blam

I not sure the stock market will be going up, but I’m pretty sure that the number of dollars needed to buy a particular stock, will be going up. Our whole economy is fake and a joke, and its all over but the revelation and the laughing.


32 posted on 03/04/2013 12:35:33 PM PST by ZX12R
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam

Well you can’t tell people it’s going to tank...they’d freak out!

Someone mention not too long ago that we shouldn’t look to the stock market as a gauge of overall economic health.

That still hold true?


33 posted on 03/04/2013 12:49:45 PM PST by WCH
[ Post Reply | Private Reply | To 1 | View Replies]

To: WCH

Not unless we know how much of that index has been bought with “created out of thin air quantitative easing” money.


34 posted on 03/04/2013 12:51:34 PM PST by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
[ Post Reply | Private Reply | To 33 | View Replies]

To: blam

It might be news if the market were the real economy at the level of the people. The number of people with disposable income to buy products and services is shrinking, the number of dollars left for them to buy these goods and services is shrinking and overall the number of dollars the average person who still has a job has available to invest in the market is shrinking.

We will before too long reach a point at which this facade can no longer be propped up.


35 posted on 03/04/2013 12:55:55 PM PST by RJS1950 (The democrats are the "enemies foreign and domestic" cited in the federal oath)
[ Post Reply | Private Reply | To 1 | View Replies]

To: MrB

I thought as much.

Now when do we SELL?


36 posted on 03/04/2013 1:05:00 PM PST by WCH
[ Post Reply | Private Reply | To 34 | View Replies]

To: WCH

Oh, I don’t know...

How close to the ground do you want to be before you pull the cord?


37 posted on 03/04/2013 1:07:18 PM PST by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
[ Post Reply | Private Reply | To 36 | View Replies]

To: blam
When I was a child in the ‘50s and early ‘60s there was excitement over the stock market running up to break 1,000. That was back when the dollar was fairly stable and not fiat money.

Now I have read somewhere that since the Federal Reserve System was established, the dollar has lost 90% of its value. Accepting that as a working figure, today's Dow Jones Industrial Average in real dollars is 1,411.

If my memory, assumptions, and stubby pencil work are accurate; that means little real gains have been made since the Federal Reserve System was established. Again if I am correct, what we are seeing is the systematic plundering of the middle class's wealth by the purposeful debasing of our currency.

And remember, as specified by Article 1 Section 8 of the Constitution, Congress has the sole authority and responsibility; “To coin Money, regulate the Value thereof, and of foreign Coin...” Congress unconstitutionally ceded this authority to an illegitimate Federal Reserve System composed of private banks.

So, “We The People”; your Congress can't pass a budget let alone a balanced budget. And it has allowed a group of private banks to debase your currency for about the last 100 years to the point you have no real money. These conditions lead to not only a stock market crash but a currency crash.

And the crash is coming fast. When it arrives you will lose everything. Your fiat currency will be worthless. Taxes on real property will explode and you will have nothing to pay the taxes with. So your real property will be seized by banks and governments. And you will be beggars.

Remember the last time something like this happened? It was called the Great Depression. It took the Federal Government's illegal seizing of real money, gold, and a World War to come out of it.

Look to China and Russia. History is getting set to repeat itself. And we are in no position to prevail.

38 posted on 03/04/2013 1:08:38 PM PST by DakotaGator (Weep for the lost Republic! And keep your powder dry!!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: blam

Interesting. Dow’s well over 14,000 now (over 14,100 even).


39 posted on 03/04/2013 1:10:42 PM PST by familyop (We Baby Boomers are croaking in an avalanche of rotten politics smelled around the planet.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: MrB

Way too close, I’m sure...LOL!

Beats taking a tens of thousands dollar beat down [or more] as before.


40 posted on 03/04/2013 1:22:25 PM PST by WCH
[ Post Reply | Private Reply | To 37 | View Replies]

To: DManA

Well... at least 10% of your viewers would think you were a freaking genius and the rest would think you were just another talking head.


41 posted on 03/04/2013 1:26:32 PM PST by willyd
[ Post Reply | Private Reply | To 7 | View Replies]

To: blam

During the hyperinflation and economic collapse of Zimbabwe, their stock markets soared too (in relation to their worthless currency).


42 posted on 03/04/2013 1:29:50 PM PST by wolfman
[ Post Reply | Private Reply | To 1 | View Replies]

To: DManA

‘On one hand. On the other ...”. We need more one-armed economists and financial gurus.
Yep, life’s a crapshoot thus my handle.


43 posted on 03/04/2013 2:07:02 PM PST by tumblindice (America's founding fathers: All armed conservatives.)
[ Post Reply | Private Reply | To 7 | View Replies]

To: Mr. Jeeves
0ne half of my brain wants the Fed to succeed while the other half says that succeeding is extremely bad. If they succeed, then anytime we get into a problem printing like crazy and buying toxic paper is the standard fix.

With the way things are going, as a routine investor you'll never where the next sinkhole is going to open up and swallow you...

44 posted on 03/04/2013 4:59:21 PM PST by EVO X
[ Post Reply | Private Reply | To 21 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson