S&P500 is 57% Undervervalued based on Apartment Prices

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By Chad Sandstedt of Value Investing Lab…

Either equities are severely underpriced or apartments are severely overpriced. With cheap agency debt and every pension fund chasing the asset class like it’s the homecoming queen, my money (figuratively for now) is on apartments being severely overpriced. Here is a quick analysis that values the S&P 500 as if it were an apartment:

S&P 500 Earnings (After-Tax)  $       83.87 (1)
Effective Tax Rate 28.5% (2)
S&P 500 Earnings (Pre-Tax)  $     117.30
Multi-Family Cap Rate 4.0%
Value of S&P 500      2,932.52
Current S&P 500 Index Level      1,258.95
% Under (Over)valued 57.1%
Notes:
(1) Through 6/30/11 (http://www.standardandpoors.com/indices/articles/en/us/?articleType=XLS&assetID=1245178702929)
(2) Source: FetchXL
Short-Seller Spruce Point Highlights Its Latest Canadian Consumer Short: Saputo

InvestReputed short-seller Spruce Point Capital Management released its latest short report this week. The firm is shorting Canadian dairy and grocery manufacturer Saputo. Spruce Point chief Ben Axler believes the company is entering a phase of declining growth and highlights the financial stress and growing challenges he sees it facing, not only in Canada but Read More

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