Economy

Oligopolies Run Our Lives

To truly understand what The Uniparty is, you must understand its corporate side. The Uniparty is not just Washington: it is every center of power in this country, as they are all connected and on the same page. They’re all just divisions of the same omnipotent Uniparty.

Multinational megacorporations have consolidated market share and power to an alarming degree over the past four decades and the end result is that they exert ever greater control over our lives. The fewer options we have, the more power the companies have over us.

A consistent theme in most major industries today is that they are dominated by just a handful of multinational megacorporations.

TV is just a few companies: Disney, Comcast, Time Warner, Viacom, CBS and Newscorp.

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In 1983, 90% of US media was divided up by 50 companies. Today six companies own 90%. Everything you see on TV comes from one of six major Uniparty corporations.

On top of this, CBS and Viacom are working on a merger, and Time Warner was just bought out by AT&T, meaning a cable provider (AT&T) now owns the content company. Another cable provider, Comcast, already owns a considerable slice of the television market, and now it will be joined by another cable provider in the Big Six (soon to be Big Five).

Entertainment: There used to be the Big Six Studios of Hollywood—Disney, 20th Century Fox, Warner Bros., Paramount, Universal and Sony—but now Disney is taking over 20th Century Fox, so there’s five. Plus, Universal is owned by NBC, which is owned by Comcast.

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So Disney is one of the Big Five of television, and also one of the Big Five of Hollywood. Ditto goes for Comcast, Warner Brothers (owned by Time Warner) and Paramount Pictures (owned by Viacom). Only Sony Pictures is not owned by a TV giant.

When I refer to “the entertainment industry” I’m referring to this five-headed oligopoly that owns virtually all of TV and Hollywood. Over the past 40 years, due to mergers and acquisitions, the entire entertainment industry has been consolidated into just five multinational megacorporations.

The point is to concentrate the power of the entertainment industry into as few hands as possible, so as to control the messaging and content closely.

It’s easier than ever to get blackballed in Hollywood today because there are so few places for aspiring actors, directors, writers and producers to go.

In case you were wondering about the music industry, there are now three major record labels: Universal Music Group (owned by French media conglomerate Vivendi), Sony Music, and Warner Music Group (which was spun off by Time Warner in 2011 and is now owned by private conglomerate called Access Industries).

Advertising: four companies, plus one Japanese form, run the advertising/marketing industry.

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Why do you think all commercials are basically the same? They’re all about pushing diversity, glorifying feminism, hitting all over whites, and trashing men.

This is because four companies control the advertising and marketing industry.

Internet and Social Media: Google, Facebook, Amazon and maybe Twitter, but only because Twitter is an important site with a lot of visitors, not because Twitter is actually big. Twitter’s market cap is $26 billion, meaning any of the Big Three could buy Twitter and barely even notice.

Online commerce is monopolized by Amazon. Search is monopolized by Google, as well as online video. Facebook owns social networking. Amazon now wields the power of making or breaking an author’s career.

The Silicon Valley oligopoly is probably the most well-known, and that’s because it is the newest and most glamorous. Seemingly overnight these companies went from quirky startups to global behemoths, and they now have more direct power over individual behavior than perhaps any companies in history.

If you run a blog or a page or a YouTube channel that the Uniparty feels is a threat, you will disappear from the internet without a trace. The internet oligopoly can ensure that. Never forget that we can only say what they permit us to say.

Groceries:

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Ten companies produce virtually every product you will find in your local supermarket.

You want to boycott Gillette razors? Sure, you can go buy razors from a company owned by Unilever. That’ll show ’em. Just make sure not to shoot yourself in the foot by supporting any other brands owned by Procter & Gamble, Gillette’s parent company, including: Tide, Gain, Dawn, Duracell, OralB, Crest, Pantene, Head & Shoulders, Old Spice, Bounty, Mr. Clean and Febreeze. Stick it to ’em!

Retail Banks: Chances are you bank with one of the four major banks.

Chances are, either JP Morgan Chase, Bank of America, Wells Fargo and Citigroup has your money.

Chase is now shutting down the accounts of political dissidents. The other three are likely to follow suit, which means you will soon be out of banking options if your political views don’t align with the Uniparty’s.

Back in the old days, banks used to be more local and smaller. Think about it: if you lived in Indiana, how could you store your money in a bank based in San Francisco? The rise of the internet has allowed megabanks to go nationwide. And so the local banks died out and gave way to the banking giant oligopoly.

Big Pharma: How could we forget this one? Perhaps the most insidious of all the major oligopolies in America, Big Pharma is literally poisoning America and making money hand-over-fist in the process.

Big Pharma is global, comprising not just American companies but European ones including Novartis (Swedish), Bayer (German), Roche (Swiss), Teva (Israeli) and GlaxoSmithKline (British). The biggest of all is Johnson & Johnson, an American giant which you’ll recall was also part of the supermarket oligopoly:

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All in all, there are 22 pharmaceutical companies worldwide with revenues greater than $10 billion. A recent article explains why Big Pharma exists:

“The pharmaceutical industry is becoming an oligopoly due to the staggering costs of developing and marketing new drugs and because of patents that protect new products from competitors. It can cost more than $1 billion to develop a new drug, get it approved by the Food and Drug Administration and bring it to market, according to “Forbes” magazine. With those kind of upfront costs, only a handful of companies including Pfizer, Merck and Novartis, can afford to create and sell new products. The government grants those companies extended patents on their drugs, and these patents protect drug developers from competitors for many years.”

One billion dollars to develop a new drug? Years of patent protection granted by the government in order to monopolize your market? That type of cost doesn’t exactly lend itself to robust competition, does it?

This is all by design: costs are so high because of the need to comply with government regulations, which were in turn written by Big Pharma lobbyists in order to discourage and prevent competition.

After all, if the government wasn’t writing the rules to make things more favorable for the Big Pharma oligopoly, then the $4 billion the industry has spent on lobbying over the past two decades has been a tremendous waste. No other industry spends more on lobbying than Big Pharma.

Insurance: Coming in second to Big Pharma in lobbying spending over the past two decades at $2.7 billion is the insurance industry, specifically healthcare. Already a highly-concentrated industry prior to 2010, the Obamacare law made it an oligopoly:

“Health insurance is a highly regulated industry with a number of government mandates at the state and federal level. The 2010 Patient Protection and Affordable Care Act requires insurers to accept more high risk patients as customers and to provide comprehensive coverage to all their customers. Such constraints favor a handful of established companies, such as Humana, Cigna, Aetna and WellPoint. Some observers suspect that companies capable of surviving new legal mandates will evolve into an oligopoly.”

Again, it’s important to note that it’s not just Obamacare that is the problem in health insurance. The industry was already considered “highly concentrated” before 2010.

Today, there are only three states in the US where the top two largest health insurance providers hold less than a 50% market share:

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And as you can see, many states’ health insurance markets are outright monopolized–for example in Alabama, Blue Cross Blue Shield has an 83% market share.

“Free market conservatives” think the problem with insurance companies is that they’re too heavily regulated and this drives costs up. But why are they so highly regulated in the first place? Because they lobbied for those regulations to get rid of competition. Who do you think primarily wrote the Obamacare law?

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The common theme is further and further concentration of power, in all industries. Fewer players means fewer moving parts, meaning things are easier to control.

Bloomberg shows that the number of public companies has been cut in half over the past 20 years:

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Fewer options for the consumer can be a good thing in certain cases–take computer and phone operating systems, for instance–but overall the lack of options usually means consumers are at the mercy of big corporations.

The whole point is power: the more options consumers have, the less power companies have. The fewer options consumers have, the more power the companies have. And right now, the scales are tipped heavily towards the corporations.

This is all by design.

Trump–as a genuine outsider who won the Presidency despite having virtually all the Uniparty’s corporate, media and political interests aligned vehemently against him–must realize that as a billionaire not in thrall to the multinational megacorporations, he is in a unique place to become the great trust-buster of the 21st century.

Trump doesn’t need the corporations to bankroll him. He doesn’t have to be their bitch the way virtually every other politician does. Most politicians go into politics to become rich, but Trump was the other way around, which is why the Uniparty was so opposed to him: they knew they couldn’t bribe and control him. That’s why he was so scary for them. And this puts Trump in a unique position where he can go after these major corporations with little fear of retaliation.

It appears to be the case that in a robust capitalist economy like ours, every century or so the major players reach a point where they attain too much power, and their influence over government regulation (i.e. writing their own rules) means that the economy is no longer functionally capitalist. It happened around the turn of the 20th century with the Robber Barrons, and it’s happening again now.

The problem with capitalism is that in theory it promotes competition, but in reality the companies that comprise the capitalist economy are inherently threatened by competition, and so they seek to crush or absorb their competitors whenever and wherever possible.

Not only that, but companies also seek to influence the government in order to obtain subsidies, favorable regulations and tax breaks. This is the process whereby Big Business and Big Government become one. It wasn’t just Amazon that paid no taxes last year: IBM, General Motors, Netflix, Chevron and US Steel, among dozens more large corporations, also paid no taxes. If you think that’s simply “the free market at work” you have been flat-out brainwashed.

The natural tendency of the capitalist system is toward oligopoly and monopoly, and so every hundred years or so, after most of the industries have become consolidated and oligopolized, and the government fully corrupted by corporate interests, it becomes necessary for some President from outside the corrupt system to come in and break up the party, effectively “resetting” the system back to its original, genuine “free market” state (or as close to it as possible.)

That should be Donald Trump.

But Trump seems to be obsessed with propelling the stock market higher and higher. I don’t know that he’s even considered the idea of becoming a trust-buster. He seems to be hanging his hat on higher corporate profits and higher stock prices. He does not seem to be concerned with the corrosive, oppressive influence of mutinational megacorporations on the American people.

It would be a terrible missed opportunity if Trump does not warm to trust-busting, because right now it’s a major talking point on the Democratic side with Bernie Sanders (the front-runner and, as it stands, likely Democratic nominee) and Elizabeth Warren.

Trust-busting needs to happen one way or another. The problem is that the Democrats who want to do it bring with them so many other problems that are equally as destructive to this country as corporate domination–namely open borders (which the major corporations all want because it equals cheap labor), toxic feminism (which the major corporations also all want because it promotes women in the workforce), nonwhite supremacism, and massive government welfare programs, among many other things.

So it has to be Trump. I hope he senses the stakes of this moment today and fulfills his potential as the 21st century’s great Trust Buster.

We’re Going into Recession Soon

They say nobody rings a bell at the top of a stock market rally, but here goes nothing: in my view, the US economy is rolling over into recession and the stock market is about to enter a multiyear (1-3yrs) period of subpar, and perhaps even terrible, returns.

Am I certain of this? Of course not. Nobody can be when discussing the future. But I’ll lay out my case here and let you decide for yourself whether you agree.

Coincidentally, today marks the 10 year anniversary of the start of the current bull market in the stock market, making it the longest ever. The bottom of the 2008 Financial Crisis bear market was March 9, 2009. Here is a look at how the market has done since:

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Ten years is a long time. The market has to drop eventually. In my personal opinion, the drop is fairly imminent (i.e. within the next 12 months).

Importantly, a major chart formation known as a “head and shoulders top” seems to be forming right now.

Here’s a closer look:

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From Investopedia:

“A head and shoulders pattern is a chart formation that resembles a baseline with three peaks, the outside two are close in height and the middle is highest. In technical analysis, a head and shoulders pattern describes a specific chart formation that predicts a bullish-to-bearish trend reversal. The head and shoulders pattern is believed to be one of the most reliable trend reversal patterns. It is one of several top patterns that signal, with varying degrees of accuracy, that an upward trend is nearing its end.”

As I always say when I discuss the stock market, chart analysis is really an analysis of investor behavior and sentiment. It’s much more than lines and numbers. The chart can tell you a lot about what investors are thinking.

What we’re seeing is investors unwilling to buy stocks at the same prices they were back in August 2018. In order for markets to keep ascending, investors need to want to continually pay higher prices. That’s no longer happening.

Right now, we might be at the top of the right shoulder, which means it would be the last best chance to sell before a major drop.

Going forward, two things can happen: the first is that the market blasts off and reaches a new high, meaning higher than the “head”. This would of course invalidate all the “head and shoulders top” talk because the right shoulder would not actually be a right shoulder.

But the second thing that can happen is the market declines over the near term. This  would confirm the head and shoulders top formation and indicate a major drop in the market is incoming. If we see the market roll over and confirm the head and shoulders top, run for the hills.

As far as the economy, there are a few things that lead me to believe we’re going into recession. Again, I have to say, I could be wrong. In fact, I hope I am; a recession would be terrible for everyone. And also I have to add this is not a recommendation to buy or sell stocks, but I will be looking to cash in my stocks in the near future. I want to sell early rather than later. That’s the whole point. This is a personal decision and doesn’t mean you need to do the same, but I’m sharing with you my personal decisions because I despise stock market articles where they make a bunch of predictions and yet the authors never actually disclose what they’re doing with their own money.

Anyway:

  1. GDP is slowing down. 2018 was a strong year for GDP. We saw the first year of 3% growth in a long time, like Trump promised. But now things are slowing considerably. The Atlanta Fed, which tracks GDP, foresees the economy growing at just 0.3% in the first quarter of 2019. 0.3% is not negative, but things are heading in the wrong direction. Two consecutive quarters of negative growth mean we are officially in recession.
  2. My dad works in the automotive industry and says he sees signs all over the place that the economy is slowing down. And indeed recent headlines have confirmed that auto sales are slowing down this year. Carmakers are trying to project optimism by blaming the slow start to the year on the cold weather, but the slowdown is more of a long-term thing: “However … the results today suggest a much bigger story: The sales pace has finally shifted into a lower gear.” Declining automotive sales equal a declining economy. When consumers are tightening their belts, the last thing they want to do is buy cars. Those are purchases that can wait until things get better. This is why automakers get hit hard when the economy declines.
  3. US household net worth fell by 3.5% (over $3 trillion) in the fourth quarter of 2018, the largest quarterly fall since a 6% loss in late 2008, when the economy was in the midst of its worst crisis since the 1930s. This is not good.
  4. The treasury yield curve inverted in December. Wall Street freaks out when this happens because it almost always precedes a recession. Basically what it means is that short-term interest rates have become higher than long-term interest rates, and this is not normal. Investors sell short-term government bonds and buy long-term bonds in a flight to safety. The last time there was a yield curve inversion prior to the one in December 2018? 2006. A year later the Global Financial Crisis began.
  5. The Russell 2000 stock market index, which tracks small-cap stocks, is already basically in a bear market. At its peak in August, it hit a level of 1,740. At its recent low in December, it hit 1,292, meaning it was down 26% from highs. Currently it sits at 1,523, still 12.5% lower than its record high. The small-caps index is a leading indicator for the major indexes like the S&P 500, Dow and Nasdaq, which track larger, more established companies. In other words, the Russell 2000 is going to break first, because in a recession, the smaller companies are going to go down before the larger, more established companies. Right now, we’re seeing a breakdown in the Russell 2000, which means the bigger companies are next.

On top of these US indicators, there are signs around the world of a slowing global economy. The European Central Bank just cut its Eurozone growth forecast to 1.1%, down from the previous forecast of 1.7%.

In Japan, the Nikkei is down 12% off its August highs. At its low point in December, the Nikkei was 21% below its August peak, officially a bear market.

The German DAX Index is 13% off its peak, which actually happened in May 2018. The DAX has been in a decline for nearly a year. At the DAX’s low point in December, it was 22% below its May highs.

We even saw a brief bear market in the Nasdaq here in the US in December, with the index recording a decline of 24% from its August record high. Right now it sits about 9% below its record high.

Relatively speaking, the US markets are still in decent shape compared to the rest of the world. At the December lows, stock markets in China, South Korea, Turkey, Italy and Mexico were in bear markets, in addition to those in Japan and Germany.

Economic expansions/bull markets rarely last as long as this one. A major reason this current period has persisted so long was zero-percent interest rates and quantitative easing, but now those Fed policies are long gone. I believe Trump prolonged (and, more importantly, improved) the Obama expansion for as long as he could, but eventually the party has to end, and it now appears it is.

I’m not urging you to dump all your stocks. That’s up to you. Make your own decisions. Do your own research.

But I am selling out now while my portfolio is up.

About the Stock Market

You’re probably aware the stock market has been tanking lately. This has lots of people wondering whether we’re about to enter a protracted bear market, defined as a drop of 20% of more from record highs. While no one can possibly know what the future holds, it is worth discussing the matter given that as of today the S&P 500 sits more than 12% beneath the record high it hit earlier this year.

Here is the context of the recent sell-off:

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Without getting too much into the chart, we can see that the market hit an all-time high in early October and then had a sharp sell-off. It rebounded slightly by mid-October, then fell to new lows by the end of the month. It attempted to rally in early November, but was unable to retake previous highs, and tumbled down to 265. Late November saw a minor rally to about the same point as the early-November rally, and then a drop-off in early December. The market sort of hesitated for a bit, then sold off again giving us the current drop we’re in now.

The main things chart analysts look for are new highs and new lows. A good sign is the market continually making new highs, a bad sign is the market making new lows. This should be pretty obvious stuff.

Another important thing is that the chart shows us not just stock prices but investor moods. The chart represents investor sentiment. New highs mean investors are willing to pay more today than they were yesterday. New lows mean investors won’t pay as much today as they were willing to yesterday. This means something changed.

We can see that after the early-October correction, the market tried three times to rally back to its highs, but all three times it failed to break out above the 280 level. That’s what technical analysts call “resistance”. Chart watchers look for “floors” and “ceilings”, also known as “support” and “resistance.” The blue line at the bottom of the chart showed the market’s previous “support” level at around 265, and we can see that it has dropped beneath the support, which generally means further pain ahead. If the market had bounced off of the 265 support level (again, the blue line), that would have been a good sign. But since it fell below the support line, it’s likely there’s further downside. It’s not guaranteed, of course, because anything can happen.

The bottom line is that lower lows and lower highs equal bad things. Higher highs and higher lows equal good things. What we’re seeing now is lower highs and lower lows: the current sell-off has reached lower lows than the October sell-off.

If we zoom out to take a bigger-picture view, we can see that the market is sitting on a fairly long-term support level not seen since April of this year, and prior to that, February. The 252-256 level seems to be a critical support (blue line again), and if we see the market drop below 252, it probably means even more pain.

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So we’ll have to wait and see. As far as buying and selling recommendations go, I don’t want to get into that because I don’t want to be responsible for anyone else’s personal finances, but for what it’s worth I’m considering selling given that my portfolio is barely down right now. That’s just me, though. I’m not telling you to sell, I’m not telling you to buy. That’s just what’s going on in my head. Also keep in mind our brains are not wired to succeed in the stock market: we are wired to be risk-averse, and so our natural instinct is to want to sell when the market is going down and there’s red everywhere, in order to avoid further loss of principal. Yet that’s often the best time to buy.

Obviously the long-term approach to the market is to buy low and sell high, and times like this underscore how hard that truly is in practice: so many people thought it would be a good time to buy in October when the market was at record highs, because things seemed to be going well. But now, when people can buy the same stocks at lower prices, they want nothing to do with the market because things seem bad.

If you think about it, a stock you liked at $100 should be far more attractive after it has fallen to $75, no? But that’s not how our minds naturally work. Our minds believe that a stock that has fallen from $100 to $75 will keep falling (eventually to zero), even though it’s more likely that the stock has probably been oversold and is due for a rally (barring any extreme situations like Lehman Brothers in 2008 or Enron, where a company has gone belly-up, in which case it most certainly will go from $100 to $75 and eventually to zero). We also believe that a stock that has risen from $75 to $100 will keep rising, even though the most likely scenario is that the gains have already been had and the stock is more likely to go down than up.

Here are the main points for the stock market:

  1. All bull markets come to an end.
  2. This one has been running since March 2009, meaning it is the longest in US history.
  3. The previous longest bull market in US history lasted nearly 10 years, from October 1990 to January 2000. However, the 1990 bear market was arguably not a “real” bear market in that the market only fell around 20% over a span of just four months. Prior to that, the market was on a long run that began in 1983, and was only punctuated by the infamous Black Monday of 1987 when the market dropped 22% in one day and -36% in total over a particularly brutal four months. But even after that, the market was back in an up-trend just a few short months afterward. I consider the period from 1983-2000 to be one long bull run given that the two technical “bear markets” within it only lasted a few months, and were not the typical multi-year down periods we generally classify as “bear markets.”
  4. Meaning, this could be the end, but then again the market could continue to run upward for years to come, even if we experience some short-term pain, perhaps even very severe short-term pain. But, so long as there is no deterioration in the underlying economic data (meaning GDP growth, unemployment, etc.), the threat of a long bear market is minimal despite the threat of a very sharp short-term drop.
  5. The bottom line is that true bear markets (again, extended periods of negative returns) happen when the economy goes into recession. The early 2000s bear market (2000-2003) coincided with the 2001 recession, although the bear market was more severe (-50% in the S&P 500) than the recession, which was very mild. The late 2000s bear market coincided with the Financial Crisis/Great Recession (late 2007-mid 2009) and saw the S&P drop nearly 60%.
  6. History shows that there’s no reason to worry about a major bear market unless the economy itself is going into recession. On that front, the economy grew 3.5% in the third quarter, which is certainly nowhere close to a recession. But, then again, the fourth quarter numbers could show economic contraction. For what it’s worth, the Atlanta Fed, which forecasts GDP, says the fourth quarter number should be 2.8% growth. While the Atlanta Fed forecasts are not always correct and are not to be treated as the Word of God, they’re generally pretty accurate.
  7. Again, no one knows what will happen next. The market could bounce off of support at around 252-253 and this correction could be over soon. Or perhaps the market breaks below the support level and goes down even more, potentially even a lot more. But, barring a recession, I don’t see a major bear market coming soon. So keep an eye on the economic data.
  8. That said, we are definitely due for a bear market and a recession sooner or later. All bull markets come to an end, and all economic expansions come to an end. Bear markets and recessions are facts of life.

What are the political implications? That’s almost a topic for another day given that I could go on for a while discussing them. Someday soon I’ll write a piece about how the economy no longer accurately predicts the swings of American politics given our increasingly tribal divisions, but we’ll operate here off of the long-running assumption that politicians’ political fortunes are more or less tied to the economy.

I’ll put it simply: if the clock runs out on the current economic expansion, Trump is probably screwed in 2020. That’s how American politics has worked for a while: when the economy is good, the party in power remains in power. When the economy tanks, the voters turn on the party in power and the White House usually changes hands.

But with the economy in good shape, Trump probably doesn’t have much to worry about as it stands right now. Sure, the market may be in rough shape, but in the grand scheme of things, this current 12% drop is nothing major. Obviously it could get worse, but the economy itself is not indicating any sort of long-term bear market or recession. Trump’s real worry should be getting the wall built.

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One final thing to be aware of: the market’s “valuation.” Is the market over-valued or under-valued? Knowing this can help us figure out whether the market has further upside or significant downside risk. We can determine valuation by looking at the market’s overall price-to-earnings ratio. A high p/e ratio means overvalued, a low p/e ratio means undervalued. Overvalued, in turn, means there’s not much upside to be had as most of the value has probably already been squeezed out.

The Shiller P/E ratio chart goes back to 1870, and it’s probably the best metric to determine whether the market is over- or undervalued. Right now, the Shiller P/E chart shows the market is very overvalued:

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We can see that at the current level of 28.3, the market has only been this expensive two times: in 1929 and during the Dot Com Bubble of the late 1990s. History shows us that the market probably doesn’t have much value left to be extracted. This is where we have to worry about “mean reversion” and that’s a bad thing because the long-term mean is right around 15.

It’s important to know where we stand in the grand scheme of things. In late 2007, just before the Great Recession and the accompanying bear market, the Shiller P/E ratio was about where it is today. The stock collapse took the market’s P/E ratio down to 15, which is close to the long-term mean.

That will happen again. It’s just a matter of when.