December 2013 Market Commentary
According to Mark Hulbert, “The current Shiller P/E is 24.4, which puts the [US] market in the 9th decile. On the assumption that the future is like the past, the market’s expected real return over the next decade is just 0.9% annualized.” Hulbert then explains that the stock market bulls argue that the “alternatives” such as bonds are hardly any better because it would take only a small increase in interest rates to produce losses in real terms over the next decade. But, according to Hulbert, “this argument doesn’t really support the conclusion the bulls draw. Just because the alternatives are awful doesn’t mean the stock market is a good place in which to invest your money. T-Bills are not an unattractive option...”
High valuations, excessive debts, and extremely bullish sentiment do not necessary imply that a US stock market collapse is imminent. This especially not in an environment of unlimited money printing but if we believe in Selling Disciplines then the combination of high valuations and extremely positive sentiment strongly argues for reducing one’s exposure to US equities. As Tennessee Williams said, “there is a time for departure even when there’s no certain place to go.”
For the full monthly market commentary, you may get a paid subscription at
Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.