S&P 500 ‘Intrinsic Value’ Rises To 1,933

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S&P 500 ‘Intrinsic Value’ Rises To 1,933

What is important to note here is just how far markets can go past the intrinsic value.  We are nowhere near a top in this market.

“Davidson” submits:

The SP500 (SPY) Intrinsic Value Index is only important when the price of the SP500 SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is below as this level as it represents the price level attractive to Value Investors in past investment cycles. This is because when Value Investors such as Warren Buffett deem stock prices attractive it coincides with the SP500 long term mean earnings trend capitalized by the Prevailing Rate. Inflation is a component of the Prevailing Rate and market lows which are created by the Value Investors incorporates this inflation factor. As the economy expands, inflation is less important in the pricing as many investors bringing fresh capital to the markets are simple trend followers and ignore many common valuation parameters.

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The steady 12mo Trimmed Mean PCE at 1.3% for the past 1yr results in the last 12mos of the index appearing as a smooth rising line vs. the choppiness prior to this period. This is because previous inflation #s were choppy and showing at times considerable swings.

Inflation last 12mos has simply been in a record period of uniformity not seen previously. Interesting to see this.

The Intrinsic Value Index is good for the period when global Value Investors use the US Real GDP + Inflation as the investing benchmark. This works only as long as the US remains a free market with inventors maintaining control of their property rights. If other countries have a faster growth rate and equal legal/political protections then, their Real GDP would begin to compete as the benchmark. I see the US Real GDP being the standard for a long time yet.

S&P 500

Via: valueplays

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Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.

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