Introduction

According to an article in Quartz today, March 9, 2017, marks the 8^th birthday of the US bull market which started on March 9, 2009.  According to the article, this is the 2^nd longest and 4^th strongest bull market in history for the S&P 500.  However, before we celebrate too excessively, we should pause and take a look at the S&P 500’s current valuation as a result.

However, before I discuss the S&P 500’s current valuation I think it only proper that I share my views about the stock market in general.  I believe it’s very important for investors to focus specifically on what they own rather than the broad markets.  Most renowned investors seem to agree that investing is most intelligent when it is most businesslike.  Furthermore, they understand that the health and vitality of a specific company is reasonably ascertainable and generally accurate enough to be relied upon.

In contrast, the often erratic and mostly irrational daily short-term volatility of stock prices in general is not. Therefore, once I have a solid handle on the intrinsic value of the companies I own, I never sweat the market.  I know from a preponderance of evidence that the future rate of change of earnings and dividend growth when purchased at a sound valuation determines my longer-term future returns. That is all I concern myself with and trust it explicitly.

This attitude and opinion is based on my belief that it is a market of stocks rather than a stock market. However, with that said, common sense would indicate it’s harder to find attractive value when the general market is excessively high, as I believe it is today.  So even though I do not sweat the market, I am smart enough and prudent enough to be cognizant of its relative valuation.

Considering that I started writing in the throes of the Great Recession, my previous offerings have been generally bullish.  This can be attributed to the fact that I considered the market as represented by the S&P 500 fairly valued up to 2013, which was when I penned my last S&P 500 offering.  As I will illustrate later, I considered the S&P 500 continuing to be reasonably valued until the fall of 2013.

However, that changed in August 2013, which partially explains why I haven’t written about the S&P 500 specifically since the beginning of 2013.  The rest of my explanation can be attributed to my dear departed mother who taught me that if I didn’t have anything good to say, I shouldn’t say anything at all.  But with reverence to my mother’s wishes, I feel I owe it to my readers to point out the excessive valuation I currently see with the S&P 500.

Setting The Stage: Principles Of Investing

As anyone who has been following my work knows by now, I don’t believe it’s possible to forecast stock markets or the economy, at least not with the precise timing that most people expect. As Warren Buffett once said: “The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable.”