AI means that the spreadsheet complexity is no longer the hard part. The moat appears to remain the proprietary data, same as it's always been in quantitative finance, as one would need: 1) A complete historical record of every S&P 500 constituent going back to 1974 (the index has had ~1,500 companies cycle through it over that time). 2) Each company's monthly index weight going back that far. 3) Each company's 10 years of earnings history at every point in time as it was reported then, not restated later. 4) Earnings for companies before they joined the index. Yikes!
That's interesting. The way this macro guy thinks about (excess) CAPE is that it really only helps at extremes, i.e. when the ERP spikes it's a buying signal (usually associated to a major shock); and when it's low it tells you stock valuations are stretched (like currently) so future returns aren't likely to be great.
I think this is how any valuation model should be used. Using valuation as an investment guide when valuations are somewhere in the middle rarely works out well.
AI means that the spreadsheet complexity is no longer the hard part. The moat appears to remain the proprietary data, same as it's always been in quantitative finance, as one would need: 1) A complete historical record of every S&P 500 constituent going back to 1974 (the index has had ~1,500 companies cycle through it over that time). 2) Each company's monthly index weight going back that far. 3) Each company's 10 years of earnings history at every point in time as it was reported then, not restated later. 4) Earnings for companies before they joined the index. Yikes!
Yesterday, I wrote a brief ode to spreadsheets, but even I'm not bored enough to embark on a project like that! https://gunnarmiller.substack.com/p/spreadsheets
That's interesting. The way this macro guy thinks about (excess) CAPE is that it really only helps at extremes, i.e. when the ERP spikes it's a buying signal (usually associated to a major shock); and when it's low it tells you stock valuations are stretched (like currently) so future returns aren't likely to be great.
I think this is how any valuation model should be used. Using valuation as an investment guide when valuations are somewhere in the middle rarely works out well.