Topic: How To Invest

What is Pat’s commentary for the week of October 17, 2017

Article Excerpt

Dear Inner Circle member, When you read the investment news and comments these days, it seems like some commentators are desperate to hit on a reason to predict a market downturn. The list of potential market-killers is endless, as usual, especially in the U.S. market. “Stock prices are too high in relation to per-share earnings (that is, P/E ratios are too high).” That’s truebut mainly in comparison to historical periods of high interest rates. When interest rates are unusually low, as they are today, P/E ratios tend to be unusually high. “Yes, but the Shiller P/E ratio is high too, and it focusses on the long term, so it’s more credible than the old-fashioned, straight-forward P/Eisn’t it?” The Shiller P/E is a specialized tool—one that’s uniquely suited to rattle today’s investors. That’s because it uses current stock prices as its “P”, but takes the average figure of the past 10 years as its “E” or earnings. The old-fashioned P/E ratios use earnings of the year…