- Some countries are three times cheaper than the S&P 500 while one is five times cheaper.
- I’ll describe an earnings exercise that helps in discovering bargains and give a hint on a few sectors to look at.
- It would take the S&P 500 31 year of constant earnings growth at 5% to reach Kroger’s cumulative earnings if Kroger’s earnings just stay flat.
As you probably know, the S&P 500 and many other indexes are extremely expensive. The cyclically adjusted price earnings (CAPE) ratio for the S&P 500 is 29.87, which is just about to pass the 1929 peak CAPE ratio. However, the situation isn’t much better around the world. The German stock index has a CAPE ratio of 19.6, the Dutch index 21.6, Australia 17.5, India 20.3, and Japan 24.9. These CAPE ratios of around 20 mean that you can expect investment returns of around 5% or lower in the long term.
I find any kind of stock market return below 10% a crazy investment because the risk of owning stocks is simply too high for anything less than 10%. You might wonder where you can find double digit investment returns. Well, this is what I’m going to share in this article. More →