Another "Lost Decade" Coming Up; Boomer Retirement Headwinds

08-23-2011 • GlobalEconomicAnalysis.blogspot.com

Moreover, demographically speaking, the current decade not only starts with very rich valuations, but also comes at a time when peak earnings of boomers have passed. Those boomers are now heading into retirement and will need to draw down savings, not accumulate large houses and more toys. There is much more in the above article including a look at fundamental reasons why valuations are currently stretched far beyond what analysts tell you. Please take a look if you have not done so already. PE Compression and Expansion 1965 - Present Also take a good look at that P/E Compression Expansion Chart 1965 to Present and compare to the charts by the San Francisco Fed. The P/E ratios will not exactly match because I use normalized earnings but the time periods match and the overall trends match as well. Starting in 1965 there was P/E compression for 18 years. Staring in 1983 there was P/E expansion for 17 years. That marked capped the biggest bull market in history. Now What? My model suggests 17-18 years of P/E compression. The Fed article suggests even longer! If so, where are stock prices headed?