So, an increasing number of talking heads believe the stock market is overvalued. And in other news, water is wet.
This CNBC story is the latest to sound a warning bell, namely that the PEG – the price-earnings to growth ratio – is the highest it’s been in the more than 30 years since it’s been measured. In plain English, what investors are willing to pay for stocks is out of whack with what they are expected to earn over the long run.
This is hardly a new development. The stock market runs in a cycle of boom, bubble, bust, recovery, repeat.
What’s different now is that so many people have a disproportionate amount of their money wrapped up in the stock market, because it’s the only place left where they can make it grow so they can retire without saving money by eating cat food (thanks, Federal Reserve! Love you guys!)
When this bubble pops – and it will, because that’s the way it works, wishful thinking aside – a lot of people are going to lose out worse than they did in the Great Recession.
A quote from my upcoming post-apocalyptic novel Big Sky Falling puts it best, and I share it here in the name of shameless self-promotion:
But Americans foolishly thought that the Greatest Nation Ever in the History of the Universe was somehow immune from the laws of mathematics. Funny thing about the universe—it runs on math, which is why Albert Einstein figured out how the whole shebang works with a blackboard and chalk.
This is a subject for a future post, but if you’re preparing for bad times, you want to have silver (some gold, too, if you can afford it, but mostly silver). And I’m not saying you want to invest in silver. You want to have the actual metal in your hand.