john boogle sees some tough times a head for stock returns

[jrkliny]

Originally Posted by oneslip

......

My personal thought it the unemployment rate is bunk- I think there are a ton of long term unemployed and underemployed Americans out there so the numbers are skewed. ......

If you were an employer trying to hire, you would not consider the unemployment rate to be bunk. Hiring in areas requiring a college degree are especially tough with unemployment rates of 3% or less. It would make no difference if potential employees dropped out of the workforce or were underemployed and not looking for work. Nor does it help if there are other people looking for work but without the necessary background and skills.

Even employers looking for unskilled workers are having difficulty. No employer wants to be stuck trying to hire from the last remaining 5% or so of the workforce. Too many individuals who are still unemployed have issues such as poor work ethic, drug/alcohol abuse, or limited ability to learn or work. Other people are unemployed because they live in areas without good employment opportunities. Sometimes it is just necessary to move from isolated rural areas to areas with jobs.

[Jean Paul Getty]

Originally Posted by jrkliny

Jack Boogle is a smart guy who lives and breathes investments. His predictions may or may not come true but I certainly am not impressed with his analysis. In fact he seemed to shoot himself in the foot when he argued the case for continuing stock market and bond investments because there is nothing else.

The P/E argument is something that seems to come up constantly not just from Boogle but from a lot of know-nothing, talking heads. Sure a high P/E ratio could occur in an over heated stock market. That hardly seems the case at this time with instead very cautious investors. Overall the P/E is a very poor predictor of future stock market behavior. Everyone, including Boogle, seems to ignore the changes in P/E that occurred due to changes in accounting practices. Due to the changes, companies have lower overall taxable earnings. Unfortunately the effect varies greatly from company to company. Coming up with an overall number that reflects average changes in P/E is difficult. The analysis I have seen indicates that instead of 15-16 as the historical average, the new average should be about 19-20 based on the changes in accounting practices.

It seems clear that we have had some extremely good stock market performance over the past few years. It seems reasonable to expect that level of performance will cool down. Certainly this past year helps confirm that idea. Anything more specific seems to be just a guess.

"New average should be about 19-20"
That's dangerous thinking billy.

[mysticaltyger]

Originally Posted by Jean Paul Getty

"New average should be about 19-20"
That's dangerous thinking billy.

Yeah, they said stuff like that--and worse--during the dot com years in the late 1990s...all that "New Economy" BS.

[Larry Siegel]

Originally Posted by jrkliny

Jack Boogle is a smart guy…

It's "Bogle."

The analysis I have seen indicates that instead of 15-16 as the historical average [P/E ratio], the new average should be about 19-20 based on the changes in accounting practices.

I don't disagree, but the "E" is abnormally high due to companies being able to borrow at essentially zero interest rates, and because high unemployment (until recently) has kept labor costs low.