원문 보기
Welcome to Trading Nation. I'm Brian Sullivan. We're joined now by Jeremy Seagull, professor of finance at the Wharton School of Business. Professor Seagull, it's great to chat with you again. Hey, NASDAQ 6 NASDAQ 6000. The Dow continues to, you know, its run. What do you make of this? Do you feel any concern about getting into sort of nosebleleed valuation territory?
Well, I'm well old enough uh and and I think uh your own Jim Kramer said it so well that this is just a total world of difference today than when we were in 1999 and 2000. I I remember then that people some uh uh financial advisors were moving their uh clients money into Microsoft because it only had a 55 PE as opposed to a 2, three, 400p of Yahoo, AOL, Sun Micro Systemystems, EMC, and I can name a dozen others.
So, uh, yeah, there, you know, there is Amazon out there, there is Netflix out there, but hey, the the bulk of them are are really not at all. In fact, many of them are are cheaper than the rest of the S&P 500. I'm going to take that as a giant. You're not worried. I I am not worried. Uh I I I actually think we have a Goldilocks situation going on now, which I guess should make me worried because we know that that doesn't always persist, but we have, you know, everything moving in tandem.
Um I mean, we've had a great earnings beat. Now, listen, we're going to get a very bad GDP this first quarter tomorrow. I think it is near zero. And look at we've gotten 75 to 80% beat. But much more important than that is the maintained or upward guidance for second, third and fourth quarter. Something we have not had for ye something we've not had for years.
It's been stunning how the year estimates have come way down by the time we get to December for the first time. Now again, anything can happen. or in April. But I mean uh it's the first time that I have seen forward guidance maintained or increased I think since we turned around uh the great crisis back in 2009.
You know yesterday we had your friend a man you know Robert Schiller of Yale on. We asked him what he thought about valuation. Listen to what he said. It hasn't been this overvalued except a couple times in history. 19 around 1929 around 2000. So I'm not saying pull out of the market. I'm saying it looks dangerous now, but it could keep going up.
What's your what's your thought with your your fellow professor and friend? Yes, my good friend and I have had a lot of conversations with that. So there's there's three things I think we should emphasize. First of all, when he talks about valuation or PE ratio, he uses a 10-year lagging average, which includes the, you know, the great recession negative0ero earnings.
I consider that a, you know, a once in a 50year event or 75 year event that's not going to repeat it. And that's why he gets a very low earnings base. Also, he uses GAP earnings, which are very conservative, not what the street uses, which may be too optimistic. I agree. I like actually S&P operating.
They're they're middle of the road, but they've become much more conservative over time. Another reason why, you know, it looks that the ratio is high. But the third thing is that valuation statement takes no account of returns elsewhere uh in the asset markets. It takes no account of where interest rates are, where real estate are, what everything else is.
It says there's one right price for for equities. Uh and the average from 1871 through 19, you know, let's say, you know, 2000 should be that average. We are not in that world. We're in a lower interest rate world. We are uh we shouldn't use a 10-year lagging average now, especially with the growth that we're seeing.
And so therefore I do not share uh Bob's high concern for this market which by the way Bob has voiced for a long time although he always tempers it at the end with doesn't mean it's not going to still go up and it still goes up. Uh so I think even he realizes there there is a there is another dynamic at work here.
Professor Jeremy Seagull disagreeing very politely with his friend and fellow professor uh Bob Schiller. And we noted that you are not worried. But when Microsoft gets to 55 times earnings again, Professor, then then maybe we'll have another conversation. Yeah. Yeah, we will have a different one then.
Yes, it will. I remember those days as well. Thank you, sir, for joining us. And folks, thank you for watching Trading Nation. I'm Brian Sullivan. We'll see you next time. d.
Comments 0