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Stock Market Overvaluation and the Passive Investor [view article]
It makes sense at first sight and the graph is very convincing. Yet after further examination I just don't think this is a good indication of further outlook, short-term or long-term. Just look at year 1990-2000 especially the latter half. In other words, both lines are neck-to-neck. So pardon me ask, isn't dot com bubble something "over-valued"... as we know it now? How come it never show up on the graph? Instead, the model believes the value is going up indeed and go hand-in-hand like an innocent individual stock buyer (note, not investor).

The reverse reasoning should also holds, just because someone using the model to say the market is overvalued doesn't mean the model recognize any undervaluation. I'm not saying the current market is undervalued, I just want to point out that this model is flawed.
Apr 26 08:25 PM

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