Yesterday, I wrote a post on how asset managers and investment consultants seem to use mostly a CAPM with some bells and whistles to come up with long-term asset class forecasts.
Standing back, do these precise valuation models give a false sense of ‘scientific’ accuracy? I can see that the Schiller CAPE is useful to assess the market - S&P500 over valued, FT-AS fair value. The Gordon GM is useful for stable Div paying companies. Otherwise is not the progress of the stock price down to ‘circumstances’ - for an individual company, and Macro changes for the market. We must always assess an individual stock by fundamentals; the flow of the market depends on Fed Reserve, economic environment, war/ pandemic, and so on.
Standing back, do these precise valuation models give a false sense of ‘scientific’ accuracy? I can see that the Schiller CAPE is useful to assess the market - S&P500 over valued, FT-AS fair value. The Gordon GM is useful for stable Div paying companies. Otherwise is not the progress of the stock price down to ‘circumstances’ - for an individual company, and Macro changes for the market. We must always assess an individual stock by fundamentals; the flow of the market depends on Fed Reserve, economic environment, war/ pandemic, and so on.
2023 Charles H. Dow Award Winner:
https://cmtassociation.org/wp-content/uploads/2023/05/The-5-Percent-Canary.pdf
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