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Are Stock Market Valuations At 2008 Levels Yet? [Part 2]

Are Stock Market Valuations At 2008 Levels Yet? - Part 1/2 by Jun Hao, The Asia Report

Stocks valuations are as cheap as they have ever been in the last decade.

Stock Market Valuations

Notice how I don’t say prices, because on a price basis, they certainly aren’t as cheap as they were in 2008. The reason why I don’t look at price alone is that it fails to take into account the years of economic productivity.

Businesses have made money in the last few years, which were either paid or to shareholders in dividends, or are represented in earnings which are retained in the company.

There’s a certain danger in anchoring to the last “crisis”, simply because the price then and now reflects a different situation.

I can imagine someone in 2009 thinking that prices hadn’t hit the all time lows of 1997 (Asian Financial Crisis), or 2001 (Terrorist Bombings of 2001), or even 2003 (SARS Crisis in South Easy Asia), and always waiting for a “better deal”.

The problem is that you would have missed out the subsequent rally. Again, bearing in mind that in 2009, any objective valuation metric would have told you that stocks were a screaming buy. In all this market volatility, I think...