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Why The Market’s Extremely High P/E Is Worrisome

Market multiples such as price/earnings can’t help us predict when market up and down swings will occur. However, they are important diagnostic tools that tell us how expensive or cheap the market is, compared with the past, including times when major market swings often were preceded by extreme P/E levels.

Below is the Crestmont PE ( a proprietary P/E calculation). It shows a very overvalued market place with one of the highest P/Es in
the history of the stock market. These macro concerns keep us cautious.

Why The Market’s Extremely High P/E Is Worrisome. This Stock Market Chart depicts the S&P Composite from 1871 to present.
Why The Market’s Extremely High P/E Is Worrisome. See the details in this Stock Market Chart.

Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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