This Sunday morning I read the following article in the NYT. “Has the economy hit bottom yet?” In the article they argue – my personal opinion – three important things:
1. Have the housing prices reached bottom yet in the US. In some states they may have but not in all.
2. Where is the P/E ratio today (around 13) of the publicly traded companies in comparison to the 1980 (below 7) and the 1930 (below 6).
3. How is the average US savings rate doing in comparison to other difficult times? Well today it is at about 3% up sharply but after the second world war it was about 7% (postwar average).
So buying stocks should look attractive soon.
Also: If you read this article you will see that today
all consumer debt is at 130% of income. Go back to 2000, and it was at 100%; 10 years earlier it was at 80% or 90%.
So this will need time to adjust but it may go faster (less then 10 years) then expected. Click on below image to open another interesting article.
Now you have to decide if you are a Momentum or a Value investor.