In sum, the use of forward-looking operating earnings to determine the current value of the market and to estimate future market levels can be highly misleading. Currently, the market is selling at 20.8 times our calculation of cyclically-smoothed reported earnings of $89, about 39% higher than the historical average of 15. This is higher than at any point in the post-war period until 1996, and about at the same level reached at the top in 1929. At present levels the market is discounting a highly optimistic outlook that leaves it increasingly vulnerable to the serious U.S. and global economic and political risks that can come to the fore at any time.
DYI Comments: NONE
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