Stocks Are Expensive

Scary Comparison

The chart below compares the current environment with the 1920s. I am not a fan of comparing current charts with past ones that led to a crash. History rhymes, but it doesn't repeat. While I think the EPS growth comparison isn't valid, the bullet points shown are mostly valid. The Fed tightening late in a business cycle isn't good news. The end of the cycle might occur in the next few years. The earnings comparisons will be tough next year, making the dotted line a possibility It's just as likely that this guess occurs as the ones which claim the earnings growth will be in the double digits for the rest of eternity. An external shock is possible, but I disagree with the notion that China will cause it. China doesn't operate with the same capitalist standards that America operates under, so I don't think the leverage will collapse the way U.S. housing did in 2007. There's a possibility China's positive 2017 won't be repeated, but I don't see a crash in the cards. Eventually you need to reevaluate the notion of crash when those who have been predicting one have been wrong for several years. If they had been bearish on growth, they would've been correct, but they went overboard, predicting a collapse which didn't happen.